CAF-6 · Chapter 9 · Question 6 of 15
A parent company owns 80% of a subsidiary. During the year, the subsidiary sells goods to the parent for Rs. 100,000 at a 20% markup on cost. All goods are still in parent's inventory. What is the Provision for Unrealized Profit (PURP)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 16,667
Explanation
Profit included in inventory = 100,000 x (20/120) = Rs. 16,667. This unrealized profit must be eliminated during consolidation.
More Consolidation (IFRS 10, IFRS 3) MCQs
- Q8In the Consolidated Statement of Financial Position, 'Share Capital' should reflect:
- Q9IFRS 3 allows NCI at the date of acquisition to be measured at either Fair Value (Full Goodwill) or:
- Q10At the reporting date, NCI in the Statement of Financial Position is calculated as:
- Q11How are 'Intra-group balances' (like a loan from parent to subsidiary) treated on consolidation?
- Q12Consolidated Retained Earnings include 100% of the Parent's retained earnings plus: