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consolidated Sopl & sofp

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › consolidated Sopl & sofp

  • This topic has 5 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • November 19, 2015 at 9:10 am #283873
    saif02bd
    Participant
    • Topics: 52
    • Replies: 62
    • ☆☆

    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??

    November 19, 2015 at 9:29 am #283875
    saif02bd
    Participant
    • Topics: 52
    • Replies: 62
    • ☆☆

    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!

    November 19, 2015 at 9:52 am #283880
    saif02bd
    Participant
    • Topics: 52
    • Replies: 62
    • ☆☆

    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)

    November 19, 2015 at 10:55 am #283906
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    In 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)

    Our free lectures on consolidations will help you. Our lectures are a complete course for Paper F3 and cover everything you need to be able to pass the exam well.

    November 19, 2015 at 5:14 pm #284001
    saif02bd
    Participant
    • Topics: 52
    • Replies: 62
    • ☆☆

    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??

    November 19, 2015 at 8:04 pm #284031
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are correct.

    PURP is only relevant if there are goods left in inventory.

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