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	49,200	15,200
Retained earnings	784,000	58,000
	833,200	73,200

During the year ended 31 March 2015, Benz Co has sold goods to Mercedes Co for $3,400. 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	784,000
Benz Co Retained earnings	58,000
Unrealised profit	(680 )
Answer	841,320

Working Unrealised profit =3,400 / 1.25 * 0.25 =680

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