question archive Soya's consolidated statement of financial position shows inventories with a carrying amount of £36,000 at 31 December 20X0 and £34,600 at 31 December 20X1
Soya's consolidated statement of financial position shows inventories with a carrying amount of £36,000 at 31 December 20X0 and £34,600 at 31 December 20X1
Subject:AccountingPrice:9.82 Bought3
Soya's consolidated statement of financial position shows inventories with a carrying amount of £36,000 at 31 December 20X0 and £34,600 at 31 December 20X1.
Soya acquired a subsidiary Milk on 1 October 20X1 when the inventories of Milk were £3,600.
The Consolidated statement of cash flow is prepared for the year ended 31 December 20X1 using the indirect method, which provides a reconciliation of profit before tax to cash from operating activities.
What ajustment should be recorded for "change in inventories" in this reconciliation?
Hint: Pay careful attention to the sign (+/-)
O a. Change in inventories — 2,200
O b. Change in inventories + 2,200
O c. None of these options are correct
0 d. Change in inventories -1,400
0 e. Change in inventories — 5,000
O f. Change in inventories + 5,000
O g. Change in inventories +1 ,400
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The correct option is [f] :Change in inventories +5000
Step-by-step explanation
The change in inventories can be computed as follows:
=Carrying amount difference+ Inventory value after acquisition
=(36,000-34,600) + 3,600
=1,400+ 3,600
=5,000
Change in inventories= 5,000
