AAT Financial Statements, Consolidated cost of sales Sample assessment question

daniel489
daniel489 Registered Posts: 14
I am working through the Financial statements sample assessment 2, question 1.5. But I am having trouble figuring this question out. The answer is £54,000. But I cannot figure out how to come to this answer. Can anybody help?


Comments

  • ChrisJ30
    ChrisJ30 MAAT Posts: 93 New contributor ?
    I'm looking at all my notes and I can't work out the answer either.
  • ChrisJ30
    ChrisJ30 MAAT Posts: 93 New contributor ?
    I don't know if this is right but from what I gather....

    A B
    Sale £18,000 -
    COS (£10,000) + (£6,000) <--- still in stock 18000 x 1/3
    Profit £8,000


    £70,000 - £16,000 = £54,000
  • daniel489
    daniel489 Registered Posts: 14
    In the question, it says there is a quarter left in the inventory which is 1/4 if I'm not mistaken?

    You have calculated it as 1/3! :#
  • ChrisJ30
    ChrisJ30 MAAT Posts: 93 New contributor ?
    Damn your right :( then I don't know...I'll ask my tutor to explain and let you know.
  • ChrisJ30
    ChrisJ30 MAAT Posts: 93 New contributor ?
    I've spent more hours on it and I'm wondering whether it's £70,000 - minus the CoS of £10,000 and minus £6,000 as (£8,000 of profit x 3/4 that's been sold)???
  • CeeJaySix
    CeeJaySix Registered Posts: 645
    1. Eliminate the inter-co sale: dr sales, cr CoS £18k.

    2. Provision for unrealised profit - the value of goods remaining in inventory in the books of B Limited is 1/4 x £18k (as that is the cost to B) = £4.5k. However the actual cost of the goods to the GROUP is 1/4 x £10k (as that is what it cost to bring them into the group) = £2.5k.

    This means that the £2k difference is unrealised profit - although A is recognising the profit, the goods haven't yet been sold outside the group and therefore from the group's perspective no profit has yet been made on those unsold goods. Inventory value should therefore be decreased by this £2k so it represents cost to the group rather than to B - dr closing stock in the P&L (part of CoS), cr inventories in the balance sheet.

    Net effect on CoS: £70k - £18k + £2k = £54k.
    daniel489Sugerlips
  • Golebatax123
    Golebatax123 Registered Posts: 54
    Hi all
    I need help in financial statement! im so stressed i failed twice any tips will appreciate :'(
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