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Basil acquired 60% of Parsley on 1 March 20X9. In September 20X9 Basil sold $46,000 worth of
goods to Parsley. Basil applies a 30% mark-up to all its sales. 25% of these goods were still held in
inventory by Parsley at the end of the year.
An extract from the draft statements of profit or loss of Basil and Parsley at 31 December 20X9 is:
Revenue 955,000 421,500
Cost of sales (407,300) (214,600)
Gross profit 547,700 206,900
All revenue and costs arise evenly throughout the year.
What will be shown as gross profit in the consolidated statement of profit or loss of Basil for the year ended
31 December 20X9?
B $751 ,946
D $751,150 (2 marks)
Hi, may I know why the unrealised profit does not require time apportionment?
The unrealised profit is never time-apportioned. It is the profit that has been charged by the selling company on sales to the other company but has not been realised because the inventory has not been sold externally and so the group as a whole has not made the profit.
However none of this is relevant for Paper PM (and question 252 in the Paper PM Revision Kit is not the question that you refer to).
I think you must be meaning paper FA or Paper FR, and this is all explained in our free lectures for Paper FA and Paper FR.