Goods in transit

Hello Sir, In the following question there is a sale has to be recorded at $ 100,000 so they debited the inventory and credited payables that's fine ,but why this $ 100,000 is not affecting the cost of sales in their answer, please help to me to clear this ambiguity , Thank you very much, ----------------------------------------------------------------------------------------------------------------------- Boo Co acquired 80% of Goose Co's equity shares for $300,000 on 1 January 20X8. At the date of acquisition Goose Co had retained earnings of $190,000. On 31 December 20X8 Boo Co despatched goods which cost $80,000 to Goose Co, at an invoiced cost of $100,000. Goose Co received the goods on 2 January 20X9 and recorded the transaction then. The two companies' draft financial statements as at 31 December 20X8 are shown below. The fair value of the non-controlling interest in Goose Co at the date of acquisition was $60,000. STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20X8 Boo Co Goose Co $'000 $'000 Revenue 5,000 1,000 Cost of sales 2,900 600 Gross profit 2,100 400 Other expenses 1,700 320 Profit before tax 400 80 Income tax expense 130 30 Profit for the year 270 50 Other comprehensive income: Gain on revaluation of property 20 – Total comprehensive income for the year 290 50 STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 20X8 $'000 $'000 Assets Non-current assets Property, plant and equipment 1,940 200 Investment in Goose Co 300 – 2,240 200 $'000 $'000 Current assets Inventories 500 120 Trade receivables 650 40 Cash and cash equivalents 170 35 1,320 195 Total assets 3,560 395 Equity and liabilities Equity Share capital 2,000 100 Retained earnings 500 240 Revaluation surplus 20 – 2,520 340 Current liabilities Trade payables 910 30 Tax 130 25 1,040 55 Total equity and liabilities 3,560 395 Required Prepare a draft consolidated statement of profit or loss and other comprehensive income and statement of financial position. It is the group policy to value the non-controlling interest at acquisition at fair value. Answer: BOO GROUP – CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20X8 $'000 Revenue (5,000 + 1,000 – 100 (W5)) 5,900 Cost of sales (2,900 + 600 – 100 + 20 (W5)) (3,420) Gross profit 2,480 Other expenses (1,700 + 320) (2,020) Profit before tax 460 Tax (130 + 30) (160) Profit for the year 300 Other comprehensive income Gain on property revaluation 20 Total comprehensive income for the year 320 Profit attributable to Owners of the parent 290 Non-controlling interest (20% × 50) 10 300 Total comprehensive income attributable to Owners of the parent (ß) 310 Non-controlling interest 10 320 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X8 $'000 $'000 Assets Non-current assets (1,940 + 200) 2,140 Goodwill (W2) 70 Current assets Inventories (500 + 120 + 80) 700 Trade receivables (650 – 100 (W5) + 40) 590 Cash and cash equivalents (170 + 35) 205 1,495 Total assets 3,705 $'000 $'000 Equity and liabilities Equity attributable to owners of the parent Share capital 2,000 Retained earnings (W3) 520 Revaluation surplus 20 2,540 Non-controlling interest (W4) 70 Total equity 2,610 Current liabilities Trade payables (910 + 30) 940 Tax (130 + 25) 155 1,095 Total equity and liabilities 3,705 Workings 1 Group structure Boo Co 80% Goose Co 2 Goodwill $'000 $'000 Consideration transferred 300 Fair value of non-controlling interest 60 360 Fair value of net assets: Share capital 100 Retained earnings 190 (290) Goodwill 70 3 Retained earnings Boo Co Goose Co $'000 $'000 Per question 500 240 Unrealised profit (W5) (20) 480 Less pre-acquisition (190) 50 Goose: 80% × 50 40 Group total 520 4 Non-controlling interest $'000 NCI at acquisition 60 NCI share of post-acquisition retained earnings (50 × 20%) 10 70 5 Intragroup issues Step 1: Record Goose Co's purchase DEBIT Cost of sales $100,000 CREDIT Payables $100,000 DEBIT Closing inventory (SFP) $100,000 CREDIT Cost of sales $100,000 These transactions can be simplified to: DEBIT Inventory $100,000 CREDIT Payables $100,000 Step 2: Cancel unrealised profit DEBIT COS (and retained earnings) in Boo $20,000 CREDIT Inventory (SFP) $20,000 Step 3: Cancel intragroup transaction DEBIT Revenue $100,000 CREDIT Cost of sales $100,000 Step 4: Cancel intragroup balances DEBIT Payables $100,000 CREDIT Receivables $100,000