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my question is on the entry done to correct unrealized profits between parent and associates.
why do we credit inventory when the associate sold to the parent since no consolidation would have taken place that would involve adding both inventories together
i must be getting it wrong somewhere
i would appreciate your reply sir as my exam is this Tuesday
thank you very much
I think the approach now is to follow the same entry as for a parent-subsidiary PURP, i.e. DR Retained earnings (seller) CR Inventory. I don’t like this approach as there is no inventory consolidated of the associate as part of the consolidation but it is at least consistent in approach thus making it easier in any exam question.