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 $80,000 to acquire,to Hudson Limited,at a mark up of 25 per cent.A quarter 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

According to IFRS 10, all transactions and balances between the parent company and its subsidiaries must be eliminated in the consolidated financial statements. In this case, Lane Limited sells inventory to Hudson Limited. As Hudson Limited is a 75% owned subsidiary, 25% of the profit (mark-up) on this transaction is attributed to the non-controlling interest. Therefore, the amount to be eliminated from the consolidated accounts of Quartermain Group Limited is 25% of the mark-up on the sale, which is:
25% x 25% x $80,000 = $2,000
Therefore, the correct answer is (C) $2,000.

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