Thurston Limited sold inventory to its parent entity,Cowboys Ltd,at a before-tax profit of $8000.The inventory 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

Since 90% of the inventory has been sold to an external party, only 10% of the profit remains unrealized. Therefore, the unrealized profit is 10% of $8000, which is $800.

Thurston Limited Sold Inventory to Its Parent Entity,Cowboys Ltd,at a Before-Tax