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Hi sir or any friend,
Parket Co acquired 60% of Suket Co on 1 January 20X7. The following extract has been taken from the individual statements of profit or loss for the year ended 31 March 20X7:
Parket Co ($) Suket Co($)
Cost of sales 710,000 480,000
Parket Co consistently made sales of $20,000 per month to Suket Co throughout the year. At the year end, Suket Co held $20,000 of this in inventory. Parket Co made a mark-up on cost of 25% on all sales to Suket Co.
What is Parket Co’s consolidated cost of sales for the year ended 31 March 20X7 (to the nearest whole $)?
answer: 710,000 + (480,000 x 3/12) – (20,000 x 3) + (20,000 x 25/125) = $774,000
My ques: why minus (20,000 x 3), should minus the inventory amount $20000 only right? bcs $20000 only held in inventory..pls correct me if im wrong..Thank you.
Hi,
The intra-group sales are $20,000 per month and we have controlled the subsidiary for three months since the acquisition date (Jan to March), hence why it has been multiplied by the 3.
Thanks
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