Quartermain Limited has the following investments: Christian Limited - a 100 per cent owned subsidiary
Hudson Limited - a 75 per cent owned subsidiary
Lane Limited - a 40 per cent owned associate
Daicos Limited - a 25 per cent owned associate
Lane Limited sells inventory,which cost Lane Limited $40,000 to acquire,to Christian Limited,at a mark up of 50 per cent.25 per cent of the inventory remains on hand at the end of the period.What is the amount to be eliminated in the consolidated accounts of Quartermain Group Limited?

Question

Quizplus · Accepted Answer

Lane Limited's sale of inventory to Christian Limited results in profits being realized by Lane Limited, which is an associate of Quartermain Limited. As per IFRS 9, profits on such transactions are eliminated to the extent of Quartermain Limited's ownership in Lane Limited, which is 40%. Therefore, the amount to be eliminated would be 40% of the profit earned by Lane Limited on the sale of inventory, which is $2,000 (50% markup on $40,000). Hence, the correct answer is option (C).

Quartermain Limited Has the Following Investments: Christian Limited - a 100