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HI sir for June 2014 exam, question on Penketh, Regarding the sales between the parent and the associate,
the Unsold inventory = 15000
Therefore PURP
= 25/125 x 15000
= 3000A% of PURP
= 30% x 3000
= 900Therefore, the only adjustment to the SOPL would be to minus this 900 from the ‘Share of profit of Associate’.
‘Share of profit of Associate’ = (A% x A’s PAT) – Current year impairment – PURP
= (30% x 10000 x 6/12) – 0 – 900
= 600But in the answer key they didn’t minus off the PURP from the Share of profit of associate.
Penketh’s share of Ventor’s profit after tax is shown as:
“Share of profit from associate (10,000 x 30% x 6/12) $1,500 and there is an addition to cost of sales of $900 being 30% x $3,000 pup
That gives us a net figure of $600 contribution to consolidated retained earnings
If you take the full $3,000 to the Ventor retained earnings (6/12 x $10,000) that leaves us with $2,000 post-acquisition profits in Ventor
Take 30% of that figure and you arrive at a contribution to consolidated retained earnings of $???
If you prefer to tackle the issue in the way that BPP and Kaplan do, that’s fine
I believe that my way is easier
OK?
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