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Hi Mike,
I’m working through the mini exercises in the notes and have queries.
I have followed your lecture and applied the method. I found the PUP on the unsold inventory, then applied double entry by DR retained earnings and CR inventory in the seller’s books. However, my answers don’t always agree with yours.
e.g. No 3. H sold 80000 goods to A at a gross profit of 30%. A had sold none of these goods by the end of the year.
I found the PUP of 24000 which was then treated in H’s books (H being the seller). However, the answer given is that it should be treated in the books of A.
Same goes for No 8.
Mulling over it, I can’t understand why PUP is being deducted from the inventory of the seller when this inventory is no longer in the seller’s books…
Can you help please?
Thanks
ClaireHi Claire,
I’m currently going through this myself and if I’m not mistaken the pup is our calculation of the profit that the selling company has made. H sold the items inventory to A and made the 24000 profit on the sale so although they no longer hold the inventory, it is in their accounts that the profit of the sale is held (the profit being the amount that we are trying to remove)
Hope this helps 🙂
Laura
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