Unrealized profit on closing inventory , Financial Accounting

UNREALIZED PROFIT ON CLOSING INVENTORY

Where one company has bought goods from another company in the group and part of these goods are included in the closing inventory, then the selling company is reporting an unrealized profit.

An entry is thus required to reverse the unrealized profit and the overstatement in closing inventory.

The following situation will apply:

a) If the holding company made the sale,
          DR.  Group retained profits
                CR. Group closing inventory

(with the full unrealized profits).

b) If Subsidiary company made the sale:
     DR.  Group retained profits (with holding company share of UP)
     DR.    Minority Interest (With minority Interest share of U.P)
                CR. Group closing inventory (with the full UP)


Note:

Where the subsidiary is company makes the sale, its profits are overstated with the unrealized profit and the subsidiary’s profit belong to both holding company and minority interest. Therefore the reversal of the unrealized profit in the situation will also affect the Minority interest.

Posted Date: 12/12/2012 2:50:08 AM | Location : United States







Related Discussions:- Unrealized profit on closing inventory , Assignment Help, Ask Question on Unrealized profit on closing inventory , Get Answer, Expert's Help, Unrealized profit on closing inventory Discussions

Write discussion on Unrealized profit on closing inventory
Your posts are moderated
Related Questions
Revocation, alteration and revival of a will 1. A will may be revoked or altered by the maker of it at any time when he is competent to dispose of his free property by will.  (

Effect of disclaimer The trustee may disclaim onerous property consisting of: Land burdened with onerous covenants; Stocks and shares; Unprofitable contracts, or

Q. Define about financial gearing? As financial gearing raise the burden of interest payments increases and earnings become more volatile. Since interest payments should be met

Interest on Zeroes: Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon bonds to raise the money. The required

First's current stock price is $260. The price may rise to $300 or fall to $170 in one month. The risk-free interest rate is 18% per year. a. Using the replication portfolio app

Home Inc. is considering buying a new piece of equipment, which will cost $715,000 and has an economic life of 5 years, in order to make a new line of product.  The company suppose

Van Aalst Company's comparative balance sheet and income statement for last year appear below: Comparative Balance Sheet

Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2014, Steven Craig and Georgia Enterprises.

what is the profitability of

Evaluate the following statements, and explain why you agree or disagree. (a)    In a recent interview, a Wall Street investment banker commented on the infrequent use of Prefer