N is a wholly owned subsidiary of U. Inventories in their individual statements of financial position at the year end are shown as:
| $ | |
| U | 500,000 |
| N | 100,000 |
Sales by U to N during the year were invoiced at $60,000 which included a profit by U of 50% on cost. 20% of these goods were included in inventories at the year end.
At what value should inventories appear in the consolidated statement of financial position?
Suggested solutions:
Working
Profit of the inter company sales = Sales / (1 + profit margin /100) * profit margin
= $20,000
Unrealised profit = 20,000 X 20 %
Unrealised profit = $4,000
| $ | |
| U | 500,000 |
| N | 100,000 |
| Unrealised profit | (4,000) |
| Answer | 596,000 |
To do the same topic again in ACCA F3 conso inventory balance