Question 3 Happy Berhad owns 40% interest in the equity capital of Merry Berhad. During the year ended 31 December 2021, intercompany sales of goods with the associate totalled RM5 million. At year-end, stocks attributable to RM1 million intercompany sales were held by the buyer. The gross profit margin to the seller was 50% on selling price. Assume an income tax rate of 28% and that full tax effect accounting applies. Required: In respect of the above intercompany sales of goods, show the consolidation adjustments required if: a. The transactions were downstream sales (investor to associate) and b. The transactions were upstream sales (associate to investor).

Question 3 Happy Berhad owns 40% interest in the equity capital of Merry Berhad. During the year ended 31 December 2021, intercompany sales of goods with the associate totalled RM5 million. At year-end, stocks attributable to RM1 million intercompany sales were held by the buyer. The gross profit margin to the seller was 50% on selling price. Assume an income tax rate of 28% and that full tax effect accounting applies. Required: In respect of the above intercompany sales of goods, show the consolidation adjustments required if: a. The transactions were downstream sales (investor to associate) and b. The transactions were upstream sales (associate to investor).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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