FA Section B · 15 marks · suggested: 18 min

Intra-group trading and balances (Pelican Group)

Questions are in English, the exam language. Companies and figures are invented for practice.

Pelican Co owns 75% of Shearwater Co. During the year Pelican sold goods to Shearwater for $40,000 at a mark-up of 25% on cost. At the year end Shearwater still held half of these goods in inventory.

At the year end Pelican's receivables include $12,000 due from Shearwater, and Shearwater's payables include $12,000 owed to Pelican. There are no goods or cash in transit.

At the year end	Pelican Co	Shearwater Co
Inventory	$80,000	$50,000
Trade receivables	$90,000	$60,000
Trade payables	$55,000	$70,000

(a) What is the total profit Pelican made on the sale to Shearwater ($)?2 marks
(b) What is the provision for unrealised profit at the year end ($)?2 marks
(c) What is consolidated inventory ($)?3 marks
(d) What are consolidated trade receivables ($)?2 marks
(e) What are consolidated trade payables ($)?2 marks
(f) Because the parent made the sale, the unrealised profit adjustment is charged against:2 marks
Because the parent made the sale, the unrealised profit adjustment is charged against:Group retained earnings onlyThe non-controlling interest onlyGroup retained earnings and the NCI in proportionGoodwill
(g) Which best describes a subsidiary?2 marks
Which best describes a subsidiary?Any entity in which another holds 20% or more of the sharesAn entity over which another has significant influenceAn entity under joint controlAn entity controlled by another entity

15 marks