CSFP Adjustments

Question 1

P and S trade with each other, and buy and sell goods on credit

Answer 1

Debit payable
Credit receivable

As bringing in as one entity

Question 2

Just prior to year end, company that has liability makes payment? Receiving company has not received cash

Answer 2

Record cash in transit

Debit cash
Credit receivable

Remove intra company balances

Debit payable
Credit receivable

Question 3

If parent and subsidiary trade, they sell goods at profit. If goos haven’t been sold outside group and are sat in the group.

Answer 3

Unrealised profit

Question 4

P sells goods to S at $125 and S has not sold goods on by end of year? (unrealised profit)

Answer 4

Debit P’s RE (seller)

Credit inventory

Question 5

If we sell goods by reporting date?

Answer 5

We don’t need to make provision, as goods are now outside the group.

Question 6

If S is seller? (unrealised profit)

Answer 6

Adjust s’s net assets at reporting date

Question 7

If P is seller? (unrealised profit)

Answer 7

Adjust retained earnings of parent

Question 8

Difference between fair value and carrying value

Answer 8

Fair value adjustments

Question 9

Fair value adjustments?

Answer 9

Used in subsidiary’s NVA

Fair value adjustment at acquisition

Fair value adjustment at reporting date - depreciation/sale of inventory

Question 10

Contingent liabilities?

Answer 10

Used in subsidiary’s NVA

Decrease at reporting date and at acquisition