Kaplan mock exam question 1.5

emmap2

Hi

Please can anyone explain the term "inventory PURP"
I have found the whole of the consolidated income statement question difficult
in this paper, has anyone done it?

sdv

emmap2 wrote: »

Please can anyone explain the term "inventory PURP"

I have not come across this term "inventory PURP". It's second time I have come across this term on this forum.

This is what I have found

PURP means "Production Requirements Plan" See the attached link PURP

This did not mean much except that the stock purchase planning had to be in greater detail.

However, Steve's acticle came to rescue. see the attached link PURP

Under "Unrealised Profits in Inventory" It says

.....................................the ‘provision for unrealised profit’ calculation. These are often referred to as PURP adjustments.

Now this makes more sense, I understand it better, because I know that the Closing Inventories in the Consolidated Income Statements should not include the "Un-realised Profits".

emmap2 wrote: »

I have found the whole of the consolidated income statement question difficult
in this paper, has anyone done it?

I don't have the question that you are working on.

However, consolidation of Income Statement in very straight forward compared to consolidation statement of SOFP.

When consolidating IS, I normally start with 4 workings

working 1 RELATIONSHIP - what percentage of Subsiduary (S) is owned by the Parent (P)

working 2 INTER COMPANY TRANSFER - deduct this from the sales of one company and Purchases of the other (at selling price)

Point of interest - Gross profit will remain the same as consoldated GP for the both companies without the above adjustments. (excluding adjustments in working 3 below)

working 3 - UN-REALISED PROFIT. the closing stock of the purchasing company will go DOWN by the un-realised profit (PURP)

Point of interest - Gross profit will go DOWN by the same amount as in working 3 when consoldating GP for the both companies

Working 4 - Non-Controlling Interest share of Profit of the Subsudairy company.


Now you can start to consolidate both Income Statements

Sales (total of both companies) (less intercomapny transfer)
COS (Total of both companys - if unrealised profit this will go UP by same amount as working 3)
GP will remain same unless there is unrealised profits. in whcih case GP down by same as working 3

Expenses add them together

NP = same as total of both IS ( unless unrealised profit)

NP profit attributed to NON CONTROLING Interest = working 4
balance to the Parent company

emmap2

Thank you for the explanation, I need to practise them now.
I have noticed that it is mainly a consolidated statement of financial position that crops up in papers. Hopefully that will be the case!!!!!!