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Hi Sir, Hope all is well
I’m having a doubt about this Inventory question. Can you help please?
Patula Co acquired 80% of Sanka Co on 1 October 20X5. At this date, some of Sanka Co’s inventory had a carrying
amount of $600,000 but a fair value of $800,000. By 31 December 20X5, 70% of this inventory had been sold by
Sanka Co.
The individual statements of financial position at 31 December 20X5 for both companies show the following:Inventories:
Patula Co $3,250
Sanka Co$1,940
Requirments: What is the consolidated inventory?Charles!
What a disaster has hit the company Sanka!
70% of $800,000 fair valued inventory has been sold so there must be 30% still unsold and that equates to $240,000
But you tell me that there is now, at the year end, only $1,940 in Sanka’s inventory
Now, if it should be the case that Sanka’s year end inventory is $1,940,000, that would be less worrisome
The fair value adjustment was $200,000 and 70% of that has gone leaving a remaining fair value adjustment of $60,000 to be added to Sanka’s inventory figure
But that’s a strange question! On what basis has Sanka valued its inventory to arrive at $1,940(000)?
It looks to me that the combined inventory should be $5,250(000)
Does that agree with the printed solution?
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