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INTER-COMPANY TRANSACTIONS AND BALANCESAs the associate company is not consolidated, care should be taken when there are trading transactions and inter-company balances between the investing company and associate company.
The following general approaches should apply:1) Inter-company sales of inventory and PPE should be ignored and not adjusted for.2) Incase of unrealized profit on PPE, opening and closing inventories and excess depreciation, then the investing company’s share of these items is not deducted from the group retained profits and also from the investment in associate company appearing in the balance sheet.
If the sale took place in the current year, then the Unrealised profit on PPE and on closing inventory and excess depreciation are deducted from the investing company share of profit before tax in associate company.However, if the sale took place in previous financial periods, then the UP on PPE, UP on opening inventory and excess depreciation are deducted from the group retained profits b/d.NOTE: The accounting treatment is the same irrespective of the company that made the sale.3) In the case of inter-company balances, the amount due to or from the associate company will still appear in the final balance sheet as they are not supposed to be cancelled out.However you may present the amounts due to or from associate company as a separate item from the other receivables or payables.
You are a Senior Financial Manager in the recently privatised Sodor Railway Engineering Corporation Plc (SREC). (a) Subsequent to privatisation the Chief Executive Officer of SR
Suppose Real Option Inc. has a product that generates the following cash flow. At t=1, the demand can be high or low with equal probability. If demand is high (low) the cash flo
Baseball Products manufactures a single product with the following full unit costs at a volume of 2,000 units: Direct materials $ 900 Direct labor 360 Manufacturing overhead* 6
DO ACCOUNTANTS EVER REALLY MAKE IMPORTANT DESIONS?
In common terms the present value of a regular annuity may be shown as given below: PVNn = A/(1 + k) + A/(1 + k) 2 + ..................+ A/(1 + k) N = A (1/(1 + k) + 1/(
Q. A prior period adjustment that corrects income of a prior period requires that an entry be made to a. an income statement account. b. a current year revenue or expense account.
Q. Explain Zero Base Budget? Zero base budgeting can be defined as - 1) An operating planning and budgeting process which requires each manager to justify his entire budget
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An introduction to the company, which focuses on the context in which the company operates: • Ownership, development and location; • Resources, processes and employment; •
Joe Shareholder owns 100 shares of Peach Company stock which is currently selling for $100 per share. Peach declares a 2-1 stock split. How much are Joe's shares worth after the st
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