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consolidation sofp

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › consolidation sofp

  • This topic has 3 replies, 2 voices, and was last updated 3 months ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 3, 2022 at 3:25 pm #649736
    thulasikaur
    • Topics: 5
    • Replies: 4
    • ☆

    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.

    March 3, 2022 at 7:36 pm #649762
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    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

    March 4, 2022 at 2:52 am #649781
    thulasikaur
    • Topics: 5
    • Replies: 4
    • ☆

    Hi Sir, how about the $20000 inventory ? why they did not deduct

    March 5, 2022 at 10:59 am #649880
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    Hi,

    We adjust for the profit on the inventory still held and not the full value of the inventory. You can see them adjusting for the unrealised profit in the (20,000 x 25/125) element of the calculation.

    Thanks

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