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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › December 2013 exam qn on polestar
For transaction (ii) on intragroup sales ,
Initially polestar transferred raw materials to southstar at $4m in june 2013. Southstar processed all of these materials incurring additional direct costs of $1.4 million and sold them back to polestar in august 2013 for $9m.
We have to deduct the PURP from the Retained earnings of Southstar although polestar made the transfer at the start because, polestar transfered it at the cost whereas southstar sold it back to polestar at a profit right ?
That’s correct. And the profit element is calculated on $3.6m intra-group profits