Blue Ltd sold inventory items (with a cost of $90 000)to its subsidiary Maroon Ltd for $120 000.Half of the inventory items were sold by Maroon Ltd to external parties before the financial year end.Ignoring taxes,which of the following statements is correct with respect to this transaction only?

Question

Quizplus · Accepted Answer

Consolidated profit will decrease by $15,000 because the intra-group sale margin ($30,000) is only realized on the half of the inventory that remains unsold within the group. The profit on the half that was sold externally ($15,000) is eliminated on consolidation.

Blue Ltd Sold Inventory Items (With a Cost of $90