On 1 January 2012, Cowboys Ltd acquired all the issued shares in Tate Ltd. At that date, the inventory of Tate Ltd had a fair value of $10 000 more than its carrying amount. By 30 June 2013, 75% of the inventory was sold to an entity outside of the group. The business combination valuation consolidation adjustment against inventory as at 30 June 2013 will be:

Question

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By 30 June 2013, 75% of the inventory has been sold, leaving 25% unsold. The adjustment needed is for the unsold portion, which is 25% of $10,000, resulting in a debit of $2,500.

On 1 January 2012, Cowboys Ltd Acquired All the Issued