ACCA F3 Retained Earnings 2

Mercedes Co has owned 100% of Benz since incorporation. At 31 March 2015 extracts from their individual statements of financial postiion were as follows:

	Mercedes Co	Benz Co
	$	$
Share capital	12,300	60,800
Retained earnings	336,000	72,500
	348,300	133,300

During the year ended 31 March 2015, Benz Co has sold goods to Mercedes Co for $13,600. Mercedes Co still had these goods in inventory at the year end. Benz Co uses a 25% mark up on all goods.

What were the consolidated retained earnings of Mercedes Group at 31 March 2015?

Suggested solutions:

	$
Mercedes Co retained earnings	336,000
Benz Co Retained earnings	72,500
Unrealised profit	(2,720 )
Answer	405,780

Working Unrealised profit =13,600 / 1.25 * 0.25 =2,720

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