- This topic has 2 replies, 2 voices, and was last updated 11 months ago by alawi sayed.
- You must be logged in to reply to this topic.
In the following question I wonder why they added PUP of .2m rather than deducting from cost of goods sold,
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:
What is the cost of sales figure to be shown in the consolidated statement of profit or loss
for the year to 31 December 20X6?
Cost of sales = $14.7m + $8.7m (9/12 × $11.6m) – $4.3m (intra?group sale) + $0.2m (PUP) =
The 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.
The PUP is always added to the cost of sales figure. By adding it then we are increasing the expense and reducing the profit.