- This topic has 2 replies, 2 voices, and was last updated 2 years ago by alawi sayed.
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- July 21, 2021 at 8:49 pm #629056
Hello Sir,
In the following question I wonder why they added PUP of .2m rather than deducting from cost of goods sold,
Thanks,
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Harry acquired an 80% holding in Style on 1 April 20X6. From 1 April 20X6 to 31 December
20X6 Style sold goods to Harry for $4.3m at a mark?up of 10% Harry’s inventory at 31
December 20X6 included $2.2m of such inventory. The statements of profit or loss for each
entity for the year to 31 December 20X6 showed the following in respect of cost of sales:
Harry $14.7m
Style $11.6mWhat is the cost of sales figure to be shown in the consolidated statement of profit or loss
for the year to 31 December 20X6?A $18,900,000
B $20,200,000
C $19,100,000
D $19,300,000Answer
D
Cost of sales = $14.7m + $8.7m (9/12 × $11.6m) – $4.3m (intra?group sale) + $0.2m (PUP) =
$19.3mThe PUP is $2.2m × 10/110 = $0.2m.
If you chose B, you have not time?apportioned the results. If you chose A you have deducted
the PUP rather than adding it. If you chose C, you have missed the PUP.July 22, 2021 at 11:54 am #629104Hi,
The PUP is always added to the cost of sales figure. By adding it then we are increasing the expense and reducing the profit.
Thanks
July 23, 2021 at 9:25 am #629193Thanks
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