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- This topic has 3 replies, 2 voices, and was last updated 2 years ago by Stephen Widberg.
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- November 12, 2021 at 8:56 pm #640510
Why does the group inventory be reduced by the amount of unrealised profit applicable instead of inventory value?
please explain the reason for thatReference:
During the year Borough sold goods too High for $10,000 at a margin
of 50%. By the reporting date, High had only sold 80% of these goods.
Included in the receivables of Borough and the liabilities of High are
intragroup balances of $5,000.
Answer:
Provision for unrealised profit
The profit on the intra-group sale was $5,000 (50% × $10,000).
The unrealised profit still in inventory is $1,000 (20% × $5,000).
The parent was the seller, so retained earnings is adjusted in (W5)
Dr Retained earnings $1,000
Cr Inventories $1,000November 13, 2021 at 4:03 pm #640561The group still has the inventory – we just need to strip out the unrealised profit element.
There is 2k of inventory of which 1k is unrealised profit.
BTW – apart from the deferred tax, PUPs are very much FR rather than SBR.
You may find it useful to watch our related FR lecture which goes through the basics.
November 19, 2021 at 8:55 pm #641025TOPIC: IAS 19 Asset ceiling
The proforma used in Kaplan study text for reconciliation and finding the remeasurement component is too confusing, particularly for asset ceiling adjustments. Can I follow the proforma used in OT lectures instead for IAS 19 problems in the exam?
If anyone could explain the answer for ‘Test your understanding 6 -Arc’ (page no:214 of the study text) it would be very helpful. Thank you.I know this is a different topic and I shouldn’t post like this, But I am not able to create a new forum, apologies! Also please fix the bug:)
November 20, 2021 at 3:15 pm #641180Stick with our proforma. The main thing is that you can explain the asset ceiling. As you know, you won’t see many calculations.
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