consolidation+journal+entry

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=Treatment of inventory - with regard to consolidation of accounts? =

while consolidating acounts, the profit element on the inventory transfered from parent company to the division should be taken out. (respond regarding the subject)

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 Best Answer: You are right, but what is your question? Did you want the journal entry? As in the profit and loss account the effects of intra group trading are eliminated (unrealised profits in inventory and inter company debtors and creditors)

Assuming you had Intra-group sales of $100,000 of which one half is in stock at the year end = $50,000

This has been sold at a mark-up of 25% on cost therefore the unrealised profit in inventory is $50,000 x 25/125 = $10,000

Your elimination adjustments: Dr Cost of sales $10,000 Cr Ending Inventory $10,000 (Reduces inventory to its original cost and eliminates unrealised profit)

The 2 sites below have some write-ups on this.

Source(s):  [|http://www.pwc.com/gx/eng/about/svcs/cor...] [|http://www.staff.vu.edu.au/Garyod/Docume...]  [|Sandy] · 7 years ago

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