Lady Ltd owns 25% of Gaga Ltd. Gaga's profit after tax for the year ended 30 June 2017 is $60 000. The tax rate is 30%. During the year ended 30 June 2017, Lady sold $10 000 worth of inventories to Gaga. These items had previously cost Lady $6000. All the items remain unsold by Gaga at 30 June 2017. Lady's share of Gaga's profit for the year ended 30 June 2017 is:

Question

Quizplus · Accepted Answer

Lady's share of Gaga's profit before tax = 25% x $60,000 = $15,000Lady's share of Gaga's profit after tax = $15,000 x (1 - 30%) = $10,500Add: Lady's profit on sale of inventories = $10,000 - $6,000 = $4,000Lady's share of Gaga's profit for the year ended 30 June 2017 = $10,500 + $4,000 = $14,300

Lady Ltd Owns 25% of Gaga Ltd