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Hi Mr Mike, I have question about sale relating to inventory
The question has been taken from September/December 2015 past exam paper
Financial position of two companies at 30 June 2015
Palistar acquired Stretcher on 1 January 2015
Palistar Co
Inventory(17000)
trade receivable(14300)
Bank(2200)
Stretcher
Trade receivable(10500)
inventory (15400)
Bank(1600)
Note:Palistar sells goods to Stretcher at cost plus 30%.Stretcher had $1.8 million of goods in its inventory at 30 June 2015 which had been supplied by Palistar. In addition, on 28 June 2015, Palistar processed the sale of $800,000 of goods to Stretcher, which Stretcher did not account for untill their receipt on 2 July 2015. The in-transit reconciliation should be achieved by assuming the transaction had been recorded in the books of Stretcher before the year end. At 30 June 2015, Palistar had a trade receivable balance of $2.4 million due from Stretcher which differed to the equivalent balance in Strertcher’s books due to the sale made on 28 June 2015
Intra-groupd trading
Sale-(1800+800)-2600
Cost of sales(2600*100/130)-2000
gross profit-600
unrealised profit is 600
debit GRE-600
Credit inventory-600then i did consolidation SFP
Trade receivable (14300+10500-2400-800)
Inventory(17000+15400-600(unrealised profit )
But in the answer they just added 800 over inventory not deducted from trade receivable?It has been sold why?Could you explain it?Acca creates everytime new innovation in consolidation.It is trade payable part
Palistar
Current liabilities -25800
Stretcher
Current liabilities18100Current liabilities 25800+18100-(2400-800)
If sold the inventory how it can show it by adding over inventory?If we imagine if Stretcher had not recorded its books and it becomes its trade receivable 800 so we have to add it over 2400 and it should be deducted from each other’s trade receivable and in the case of trade payable it should deducted the same amount.
“Current liabilities 25800+18100-(2400-800)”
You cannot deduct that 800 from the payables because it isn’t yet included in those payables
When the goods are received by Stretcher and Stretcher puts through the double e entry, they will Dr Purchases and Cr Payables with the $800
So your payables line will look like:
Current liabilities 25,800 + 18,100 + 800 – (2400 + 800)
So far as I can see, the Trade Receivables line should read:
Trade receivable (14,300 + 10,500 – 2400) because that 800 is already included within the Palistar figure of 2,400
Better?
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