N is a wholly owned subsidiary of U. Inventories in their individual statements of financial position at the year end are shown as:
| $ | |
| U | 200,000 |
| N | 800,000 |
Sales by U to N during the year were invoiced at $80,000 which included a profit by U of 60% on cost. 10% 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
= $30,000
Unrealised profit = 30,000 X 10 %
Unrealised profit = $3,000
| $ | |
| U | 200,000 |
| N | 800,000 |
| Unrealised profit | (3,000) |
| Answer | 997,000 |
To do the same topic again in ACCA F3 conso inventory balance