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PUP associates (example 4 from opentuition lecture notes)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › PUP associates (example 4 from opentuition lecture notes)

  • This topic has 1 reply, 2 voices, and was last updated 4 weeks ago by P2-D2.
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  • Author
    Posts
  • July 8, 2022 at 4:02 am #660139
    huiking
    • Topics: 5
    • Replies: 0
    • ☆

    Hello,

    I just came across that the example 4 (pg122) of opentuition note of chapter 25 Associates (latest version)
    If the parent sells to the associate:
    Dr Group retained earnings/Cost of sales
    Cr Investment in associate (reduce goods to cost to the group)

    Example 4 (extract)
    During the year, Helvellyn (Parent ) sold goods to Armboth (associate) for $40 million at a margin of 20%. At the reporting date Armboth still held half of the goods in inventory

    The answer given is
    P S conso
    Revenue 1,645 1,280 2,925
    COS (1,205) (990) (2,195)
    Gross profit 703
    Op. costs (190) (120) (310)
    Finance cost (55) (30) (85)
    Associate (25% x (200 x 6/12)) – 1 (PUP) – 1
    (impairment) 23

    My question is : why the adjustment is not consolidated cost of sales being added the pup of 1 but deducted from the share of profit of associate?

    July 10, 2022 at 8:24 pm #660261
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6158
    • ☆☆☆☆☆

    Hi,

    Good spot! Yes, the parent has made the sale and so the adjustment should be to cost of sales. I’ll get it updated.

    Thanks

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    Posts
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