the follwing figures related to A co. and its sub B co. for the year ended 31 dec 20X9:
A co:
rev 600,000;cos (400,000)=gp 200,000
B co:
rev 300,000;cos(200,000)=gp 100,000
during the yr A co. sold goods to B co. for $20,000,making a profit of $5000.
these goods were all sold by B co. before the yr end.
what id the amounts for total revenue and gp in the CSOPL of A CO. before the year end??
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consolidated Sopl & sofp
my calculation was:
rev(600000+300000-20000)=880,000
cos(400000+200000-20000+5000)=585,000.
so,gross profit $295,000
but the solution says gross profit is 300,000.
if all intra traded goods sold by the year end the adjustment should be:
#CSOPL:
1.revenue+intra trade
2.cost of sales+intra trade-PURP
#CSOFP:
1.inventory-PURP
2.if P sales to S(deduct PURP from RE)
3.if S sales to P(deduct PURP from net asset of sub @reporting date)
please explain sir!
typing mistake:
#Csopl:
1. revenue-intra trading
2.cost of sales -intra trading+purp
#csofp:
1.inventory-purp
2.if p sale to s(deduct purp from Re of P)
3.if s sale to p(deduct purp from net asset of sub @reporting date)
10y ago#3In your cost of sales you have added on 5,000.
However we only add the profit in goods that are still in inventory at the year end - the PURP.
Here, there is no inventory at the year end that was from inter-company sales. Therefore there is no PURP and therefore you should not have added the 5,000.
The profit is therefore 300,000.
(The purpose of adjusting for the PURP is to remove profit on goods that have not been sold externally. Since there is no inventory left (and therefore no PURP) all the goods have been sold externally and therefore the group is entitled to all of the profit, and no adjustment is required)
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thanks moffat sir..
PURP adjustment for CSOPL is clear.
now, say the inventory of Sub includes goods purchased at a cost of $8000 from Parent at cost plus 25%.All of the goods had been sold on by S by the reporting date.
CSOFP adjustment:
as all goods has been sold that not effect inventory and PURP in group retained earnings.
am I right sir??
10y ago#5You are correct.
PURP is only relevant if there are goods left in inventory.
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