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Retained earning

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Retained earning

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • November 9, 2021 at 12:30 am #640245
    Nikitagarwal
    Participant
    • Topics: 154
    • Replies: 147
    • ☆☆☆

    Ruby Co owns 30% of emerald co. Emerald co sold goods to ruby for 160,000. It applies one third of mark-up on cost. Ruby still have 25% of these goods in inventory at the year end.

    What amount should be deducted from consolidated retained earning ?

    My question – they have divideded 160,000 by 4? I dont understand why so ?

    November 13, 2021 at 8:31 am #640532
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    The division by four is the mark up. The profit is 1/3 of the costs of selling the goods. The revenue will therefore by 1 and 1/3 of the costs, i.e. cost plus 1/3 of the costs.

    to work out the profit from the sales revenue then we will take 1/3 of the 1 and 1/3, which works out as 1/4. Try it and you’ll see that it works.

    Thanks

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