Intragroup Trading

Pages 48 and 49 of the free course notes should help, and the example Petras and Signe example 2 on page 49 With Prodigal and Sentinel, we have the profit equation as: Cost + Profit = Selling Price 30 + 10 = 40 So profit is 1/4 of selling price ... ... and there are 12 selling price goods in inventory at the year end ... ... so there must be 3 worth of pup (1/4 x 12) the adjustment is to ADD the pup to cost of sales and reduce inventory on the statement of financial position The adjustment to cost of sales works its way through to the statement of financial position by way of a REDUCTION in retained earnings ... not an addition as you have written The adjustment is in the records os Sentinel so that will affect the post-acquisition profits in Sentinel and that, in turn, affects the working W3 consolidated retained earnings and working W5A non-controlling interest on the statement of financial position Work your way through the mini-exercises towards the back of the F7 course notes, pages 204 and 205 OK?