Question

Public Berhad owns 75% of the equity sharesin Bell Berhad. At 31 July 2018, the inventory of Public Berhad was valued at RM420,000 and included goods costing RM60,000 that it hadpurchased from Bellat cost plus20% mark up.

At 31 July 2018, inventories were valued at RM445,000 in the consolidated statement of financialposition of the Public Group.

At 31 July 2018, provide the inventory figure in the statement of financial position of Bell.

Answer 1

Inventory as on 31st July 2018 in the standalone financial of Bell Berhad :

Inventory of Public Berhad is valued at RM 4,20,000.

It includes goods purchased from Bell Berhad (subsuidiary company) at RM 60,000 which were sold by Bell Berhad at cost plus 20%. Hence the profit margin in such goods is RM 10,000 [(60,0000/1.20)*20%]

The profit margin of RM 10,000 included in the inventory value of Public Berhad is unrealised and hence shall be deducted from the inventory value while preparing consolidated financial statement.

Hence, inventory value of Public Berhad for the purcpose of consolidated financial statement is RM 4,10,000 (4,20,000 - 10,000)

Total inventory value in consolidated financial statement is RM 4,45,000

Hence, inventory value of Bell Berhad as on 31st July 2018 is RM 35,000 (4,45,000 - 4,10,000)