Aladdin Ltd sold inventory items (with a cost of $100 000)to its subsidiary Genie Ltd for $120,000.Half of the inventory items were sold by Genie Ltd to external parties before the financial year end.Ignoring taxes,which of the following statements is correct with respect to this transaction only?
A) Consolidated sales will decrease by $60 000.
B) Consolidated sales will decrease by $100 000.
C) Consolidated profit will decrease by $10 000.
D) Consolidated profit will decrease by $20 000
E) Consolidated cost of goods sold will decrease by $50 000.

Question

Quizplus · Accepted Answer

The unrealized profit on the unsold inventory (half of $20,000 profit) is $10,000, which needs to be eliminated from the consolidated profit.

Aladdin Ltd Sold Inventory Items (With a Cost of $100