On 1 January 2017, Cowboys Ltd acquired all the issued shares in Tate Ltd. At that date, the inventory of Tate Ltd had a fair value of $10 000 more than its carrying amount. By 30 June 2018, 75% of the inventory was sold to an entity outside of the group. The business combination valuation consolidation adjustment against inventory in relation to the transaction as at 30 June 2018 will be:

Question

Quizplus · Accepted Answer

By 30 June 2018, 75% of the inventory has been sold, leaving 25% unsold. The adjustment is for the unsold portion: 25% of $10,000 = $2,500. Thus, a debit of $2,500 is needed.

On 1 January 2017, Cowboys Ltd Acquired All the Issued