QUESTION 4 (25 MARKS)

(a)The assets shown in the individual financial statements of a group company may include assets acquired from another company in the group. If such assets have been transferred between the two companies at a price in excess of original cost, then their valuation includes an element of unrealised profit and this must be eliminated when the consolidated statement of financial position is prepared.

Required:

Explain THREE (3) situations commonly arises when inventories are transferred between group members at prices whuich exceed original cost.

(9 marks)

QUESTION 4 (25 MARKS) (a) The assets shown in the individual financial statements of a group company may include assets acquired from another company in the group. If such assets have been transferred between the two companies at a price in excess of original cost, then their valuation includes an element of unrealised profit and this must be eliminated when the consolidated statement of financial position is prepared. Required: Explain THREE (3) situations commonly arises when inventories are transferred between group members at prices whuich exceed original cost. (9 marks)