Thurston Limited sold inventories to its parent entity, Cowboys Ltd, at a before-tax profit of $8000. The inventories originally cost Thurston Limited $32 000. At balance sheet date, Cowboys Limited had sold 90% of the inventory to an external party. The consolidation adjustment entry (excluding tax effects) will eliminate unrealised profit amounting to:

Question

Quizplus · Accepted Answer

The unrealized profit on the remaining inventory is 10% of the $8000 profit, which is $800.

Thurston Limited Sold Inventories to Its Parent Entity, Cowboys Ltd