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please help
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 amount should be deducted from consolidated retained earnings in respect of this transaction?The pup is 33.3/133.3 x $160,000 = $40,000
MY way (that is not the same way as BPP nor Kaplan) is to deduct the full $40,000 from the associate’s retained earnings
Then, when calculating the group’s share of the associate’s retained earnings, the principle of eliminating the group’s share of the associate’s pup is automatically dealt with
Having calculated the group’s share of the associate’s adjusted retained earnings, that calculated figure is then the basis for:
Dr Investment in associate
Cr Consolidated retained earningsOK?
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