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The inventories of Simone (sub) and Alberta (associate) at 30 sept 2008 included components purchased from Pierre (parent) during the year at a cost of $20 M to Simone and $16 to Alberta. Pierre supplied these components at cost plus mark up of one-third.
Could you please tell me how to calculate URP here?
Thanks.THIS CERTAINLY DOES NOT HELP! ANYONE READING THIS, PLEASE, PLEASE PLEASE IGNORE. THIS IS A CLASSIC EXAMPLE OF HOW BEST TO THROW AWAY 2 MARKS IN THE EXAM
note that mark up ..is on cost
margin is on saleP–>S (1/3 * 20)
adjustments needed:
-Retained Earnings P
-inventories
-cost of saleTHIS CERTAINLY DOES NOT HELP! ANYONE READING THIS, PLEASE, PLEASE PLEASE IGNORE. THIS IS A CLASSIC EXAMPLE OF HOW BEST TO THROW AWAY 2 MARKS IN THE EXAM
P–>A (1/3 * 16)
adjustments needed:
-Retained Earnings P
-investment in associate(instead of inventories)
-cost of salenote if A–> P the adjustments needed are:
-Retained Earnings P(always P)
-inventories
-share of profits of associate(instead cos)hope this helps
THIS CERTAINLY DOES NOT HELP! ANYONE READING THIS, PLEASE, PLEASE PLEASE IGNORE. THIS IS A CLASSIC EXAMPLE OF HOW BEST TO THROW AWAY 2 MARKS IN THE EXAM
In Pierre’s records, the pup is 1/3 / 4/3 x 20 = 5m.
In P Dr Retained earnings 5m, Cr Inventory 5m
For the pup in inventory from the Associate company transaction, I ALWAYS make the necessary adjustment in the records of the associate, whether it was the buyer or the seller.
The calculation is 1/3 / 4/3 x 16 = 4m
In Alberta’s records, Dr Retained earnings 4m , Cr Inventory 4m
Now, when calculating the group’s share of the associate’s post acquisition retained, the group’s share of the unrealised profit will automatically be eliminated .
This method results in a slightly different result from the method adopted by BPP and Kaplan sometimes!
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