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At 31 March 20X4 Picant’s current account with Sander was $3.4 million (debit). This
did not agree with the equivalent balance in Sander’s books due to some goods-in-
transit invoiced at $1.8 million that were sent by Picant on 28 March 20X4, but had not
been received by Sander until after the year end. Picant sold all these goods at cost
plus 50%.The answer for this is: 1.8m x 50/150 = 0.6m
Why is the adjustment only account for the 1.8m GIT, and not for the 1.6m? When I was reading thru the question, I thought the adjustment for PUP should be using the 3.4m bcs I assumed the 1.6m is not yet sold.
Hi,
We only need to account for the goods-in-transit for the PUP as that is what will have been sold at a profit between the group companies and has not yet been sold outside of the group.
We aren’t told anything about the other $1.6 million that is due between the group companies, so we have to assume that the have been sold outside of the group and no PUP adjustment is required.
Thanks.
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