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For the income statement in consolidation, must you always add the amount of unrealised profit to the total cost of sales of the two company in addition to subtracting the unrealised sales figure from the cost of sales?
We certainly do subtract the PURP from the cost of sales!!
We add the PURP to the cost of sales and that is all (apart from, obviously, subtracting it from the value of the inventory in the SOFP).
I think you might be confusing it with inter-company sales, which is a different thing. We subtract them from both the sales and from the cost of sales.
I really do suggest that you watch my free lectures on consolidations. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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