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I want to have your expertise on a quite complex scenario for Consolidation
and Elimination.
P Co. is parent company to S Co.
Cost of Goods P Co. incurred 100 goods @ 100/- = $ 10,000,
P Co. sells goods to S Co. 50 goods @ 150/- = $ 7500
S Co. Sells 25 Goods @ 200/- = $ 5000/-. S Co. Sells these goods to 3rd
party customer
At Year end 25 goods remains in S Co.'s inventory @ 150/-
Journal Entries:
P Co.
Purchases
Dr. Inventory 10000
Cr. Accounts Payable 10000
Sales
Dr. Accounts Receivable 7500
Cr. Sales 7500
Inventory
Dr. COGS 5000
Cr. Inventory 5000
S Co.
Purchases
Dr. Inventory 7500
Cr. Accounts Payable 7500
Sales
Dr. Accounts Receivable 5000
Cr. Sales 5000
Inventory
Dr. COGS 3750
Cr. Inventory 3750
Elimination Entries
Dr. Accounts Payable 7,500
Cr. Accounts Receivable 7500
Dr. Sales 7500
Cr. COGS 7500
Dr. Unrealized profit/COGS 1250
Cr. Inventory 1250
I have separate accounts for Inter company Sales, Inter company Purchases,
Inter company AR, Inter company AP. Challenge is to make the adjustments in
COGS and Inventory. How can I post these eliminations in MR while
consolidation?
Please suggest.
Hello Afnan,
MR is a pure reporting tool where you cannot add or post transactions.
In your case the issue seems to be the intercompany profit that results from the items sold from P to S.
That is, in P, you sell items for $150 that have a cost price of $100. In other words, your stock goes down by $100 x quantity
In S, your stock value increases by $150 x quantity.
To get this resolved, you can have a look at the following blog posts from MS who published a series of 7 posts on consolidations. Here is one of them.
Would be great if you could review them and let us know if this helps you resolving your issue.
Best regards,
Ludwig
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