Part B Boromir Ltd owns 100% of Samwise Ltd, which in turn owns 100% of Saruman Ltd.   During the financial reporting period, Boromir Ltd sells inventory to Samwise Ltd at a sales price of $350,000, which cost Boromir Ltd $200,000 to produce. Samwise Ltd subsequently sells the same inventory to Saruman Ltd for $400,000 without incurring any additional costs.   By the end of the financial reporting period, Saruman Ltd has sold half of this inventory to companies outside the group for $450,000, and kept the remining half of the inventory on hand.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Part B

Boromir Ltd owns 100% of Samwise Ltd, which in turn owns 100% of Saruman Ltd.

 

During the financial reporting period, Boromir Ltd sells inventory to Samwise Ltd at a sales price of $350,000, which cost Boromir Ltd $200,000 to produce. Samwise Ltd subsequently sells the same inventory to Saruman Ltd for $400,000 without incurring any additional costs.

 

By the end of the financial reporting period, Saruman Ltd has sold half of this inventory to companies outside the group for $450,000, and kept the remining half of the inventory on hand.

 

 

 

Required:

  1. a) From the economic entity’s perspective (ie. the group’s perspective), determine the sales revenue for the financial reporting period, and explain your answer.

Type your answer here

 

 

 

 

 

 

 

 

 

  1. b) From the economic entity’s perspective (ie. the group’s perspective), determine the value of closing inventory for the financial reporting period, and explain your answer.

Type your answer here

 

 

 

 

 

 

 

 

 

 

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