What is the amount of unrealised profit that needs to be eliminated at the end of the period,in the following situation,where Barker Limited is the parent of Corbett Limited? (Ignore the tax effect.)
Barker purchases 500 units of inventory for $20 each.Barker sells this entire inventory to Corbett at a mark-up of 50%.At the end of the period,100 units are on hand.
A) $1000
B) $2000
C) $3000
D) $5000

Question

Quizplus · Accepted Answer

The unrealised profit per unit is calculated as the selling price minus the cost price. Barker sells the inventory to Corbett at a mark-up of 50% on the cost of $20, making the selling price $30 ($20 + $20*50%). The unrealised profit per unit is $10 ($30 - $20). Since 100 units are on hand at the end of the period, the total unrealised profit to be eliminated is 100 units * $10 = $1000.

What Is the Amount of Unrealised Profit That Needs to Be