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Assume year end 31 match
Parent-picant
Subsidiary-sanderAt year end picants current account with sander was 3.4m(debit). This dint agree with equivalent balance in sander book due to some good in transit invoiced at 1.8m that were sent by picant just before yr end but not received until after yr end by sander. All goods sold are 50%markup
I need all double entries of these transactions and the figure we need to deduct from rec and pay balances in SFP
1 – accelerate the goods into Sander
Dr Purchases $1.8m
Cr Picant current account $1.8mNow the current accounts reconcile, so cancel. Picant’s records already had recorded the goods in transit so the reconciled balance must be $3.4m
2 – reduce consolidated receivables and consolidated payables by $3.4m
But the inventory is not in either entity’s records so increase Sander’s inventory by $1.8m
Now Sander’s inventory includes unrealised profits on those goods that we have just accelerated into Sander so eliminate the unrealised profits
If mark up is 50%, profit in the $1.8m is $600,000
So
Dr Picant’s retained earnings figure $600,000
Cr Consolidated cost of sales $600,000May I strongly recommend that you work through the examples in the free course notes pages 46 – 49
OK?
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