S Ltd(a partially owned subsidiary), sold inventories for the first time to its parent, P ltd during the reporting period ended 28 February 2015, at a profit mark up of 25% on cost price. On 28 February 2015 inventories to the value of R100 000(at cost to P Ltd ) were still on hand. The company tax rate is 28%. Total sales from S Ltd to P Ltd for the current reporting period amounted to R200 000 How much is the unrealized intra group profit included in closing inventories? Select one: a. R25 000 b. R5 000 c. R20 000 d. R100 000
S Ltd(a partially owned subsidiary), sold inventories for the first time to its parent, P ltd during the reporting period ended 28 February 2015, at a profit mark up of 25% on cost price. On 28 February 2015 inventories to the value of R100 000(at cost to P Ltd ) were still on hand. The company tax rate is 28%. Total sales from S Ltd to P Ltd for the current reporting period amounted to R200 000 How much is the unrealized intra group profit included in closing inventories? Select one: a. R25 000 b. R5 000 c. R20 000 d. R100 000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Q22
S Ltd(a partially owned subsidiary), sold inventories for the first time to its parent, P ltd during the reporting period ended 28 February 2015, at a profit mark up of 25% on cost price. On 28 February 2015 inventories to the value of R100 000(at cost to P Ltd ) were still on hand. The company tax rate is 28%. Total sales from S Ltd to P Ltd for the current reporting period amounted to R200 000 How much is the unrealized intra group profit included in closing inventories?
Select one:
a. R25 000
b. R5 000
c. R20 000
d. R100 000
Expert Solution
Step 1
In the consolidated financial statements, all the intragroup transactions and related gains and loss should be eliminated
In this case, the unrealized intra group profit in closing inventories is equal to profit made by S Ltd on the sale of R100,000 goods to P
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