A Ltd holds a 60% interest in B Ltd. B Ltd sells inventory to A Ltd during the year for $10 000. The inventories originally cost $7 000 when purchased from an external party. At the end of the year all inventories are still on hand. The tax rate is 30%. The NCI adjustment to this intragroup transaction is a debit to NCI of:
A) Nil.
B) $840.
C) $2 100.
D) $3 000.

Question

Quizplus · Accepted Answer

The unrealized profit on the inventory is $3,000 ($10,000 - $7,000). The NCI adjustment is 40% of the unrealized profit, which is $1,200. After tax adjustment (30%), it becomes $840.

A Ltd Holds a 60% Interest in B Ltd