ACCT3011 Study Guide - Quiz Guide: Perpetual Inventory, Deferred Tax, Retained Earnings

363 views2 pages
3 May 2018
Department
Course
Professor
Tutorial 4 (Week 5 week commencing 9 April 2018)
Question 4.11 (part a and c)
Assuming a periodic inventory system (The textbook says that Alpha Ltd group adopts
the perpetual inventory system, we changed it in unit of schedule)
Consolidation adjustment to eliminate intragroup sales to $6.1million
Sales Revenue $6,100,000
Purchases $6,100,000
(c) Unrealised profit in opening inventory
Note we are also told separately about unrealised profit in closing inventory and so the
correct approach here, is to assume that this opening inventory was sold/used so the
profit is realised in the year; consider why
Cost price is $1,400,000/1.5 = $933,333
Unrealised profit is $1,400,000-$933,333=$466,667
Tax at 30% = $140,000
Retained earnings January 1 20X8
$326,667
Tax expense
$140,000
Cost of goods sold (opening inventory)
$466,667
Elimination of the intragroup unrealised profit in closing inventory at December 31 20X8
Cost price is $1,900,000/1.5 = $1,266,666
Unrealised profit is $1,900,000-$1,266,666=$633,334
Tax at 30% = $190,000
Cost of goods sold (closing inventory)
$633,334
Inventories
$633,334
Deferred tax asset
$190,000
Tax expense
$190,000
Another way to think about it is to assume that the $6.1m was the only intra-group
transaction during the year and assume that B Ltd had acquired the inventory in the
current year (mark up 50%). Assume that the group adopts the periodic system of
inventory, and then consider this worksheet:
A
B
Eliminations
Group
Sales
xxx
(6100000)
6100000
xxx
Opening
inventory
1400000
-
(466667)
933333
Purchases
6100000
4066666
(6100000)
4066666
Closing
Inventory
(1900000)
-
633334
(1266667)
COGS
5600000
4066666
3733333
Inventory
(balance sheet)
1900000
(633334)
1266667
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows half of the first page of the document.
Unlock all 2 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Tutorial 4 (week 5 week commencing 9 april 2018) Assuming a periodic inventory system (the textbook says that alpha ltd group adopts the perpetual inventory system, we changed it in unit of schedule) Consolidation adjustment to eliminate intragroup sales to . 1million. Note we are also told separately about unrealised profit in closing inventory and so the correct approach here, is to assume that this opening inventory was sold/used so the profit is realised in the year; consider why. Elimination of the intragroup unrealised profit in closing inventory at december 31 20x8. Another way to think about it is to assume that the . 1m was the only intra-group transaction during the year and assume that b ltd had acquired the inventory in the current year (mark up 50%). Assume that the group adopts the periodic system of inventory, and then consider this worksheet:

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers

Related Documents