Intra entity transactions

This topic has 5 replies, 2 voices, and was last updated 6 years ago by MikeLittle.

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January 29, 2016 at 11:27 am #298458
Candy
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Dear Mike,

Can you please just clarify if i am understanding our adjustments for the above:

1st – Any receivables and payables must be cancelled against one another.

2nd – Then any NET PUP from unsold inventory must be removed from Inventory (company that bought it – receiving comp.) and Retained earnings of selling company?

Or remove both from selling company?

Thanks Mike
January 29, 2016 at 2:57 pm #298474
MikeLittle
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Remove both from selling company – as I explain in the video, it makes no difference in inventory whether the cross-addition is

30 + 60 – 10 or

30 – 10 + 60

But it is REALLY important that you do the retained earnings deduction against the earnings of the selling company

What do you mean by “NET PUP” – where’s “NET” fit into this? You have me worried!

You’re not likely going to be able simply to cancel receivable against payable. There will most likely be either goods in transit, cash in transit or even both. There’s an example in the course notes (Jurate and Dovile if I remember correctly)

Only when you have adjusted for the in transit items will you then be in a position to cancel receivable against payable

OK?
January 30, 2016 at 4:46 pm #298575
Candy
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Yes I was expecting to get in transit and cash/cheque timing calculations which will lead to cancelling receivable against payable.

I meant PUP and not Net pup only relates to NCA due to depreciation?

But i think it is possible that we will be expected to calculate pup for intra group inventory?

Thanks
January 31, 2016 at 9:03 am #298617
MikeLittle
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It certainly IS possible that you could be faced with having to calculate pup on intra-group inventory – it’s almost 100% that you’ll be faced with that!

You could even be faced with having to calculate pup on intra-group in-transit inventory!

In that case, reconcile the intra-group balances, do the cancellation and THEN calculate the pup for adjustment in inventory and cost of sales
February 6, 2016 at 6:16 pm #299534
Candy
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Thank you Mike
February 6, 2016 at 7:58 pm #299541
MikeLittle
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You’re welcome
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