Hello,
Q) Ruby owns 30% of Emerald and exercises significant influence over it. Emerald sold goods to Ruby for 160,000. Emerald applies a one third mark up on cost. Ruby still had 25% of these goods in inventory at the year end.
What about should be deducted from consolidated retained earnings in respect of this transaction?
1) 40,000
2) 3,000
3) 10,000
4) 4,000
Answer: (160,000/4) x 25% x 30% = 3,000.
What i am not able to understand is where did 4 come from?
Thanks in advance
Ask the Tutor ACCA FR
Mock Exam2- Q19 Consolidation
10y ago#1"Answer: (160,000/4) x 25% x 30% = 3,000."
cost + profit = selling price
profit is 1/3
therefore cost is 3/3
and selling price is 4/3
profit as a proportion of selling price is 1 (third) / 4 (thirds)
or 1/4
so divide $160,000 to find the profit element of the $160,000 sale = $40,000 and on we go
OK?
Perfect. Thank You.
10y ago#3You're welcome
can we do this as 160/133 *33% ?
5y ago#5Technically it should be 33.3333/133.333333 to get 0.25, i.e. 25%
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