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Question: q parent ltd owns 100 of the shares of...

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Q- Parent Ltd owns:

§  100% of the shares of Blue Ltd

§  80% of the shares of Green Ltd

§  60% of the shares of Yellow Ltd

 

For the year ending 30 June 2021, Parent Ltd sells inventory to each of Blue Ltd, Green Ltd and Yellow Ltd for $100 000 (so $300 000 in total). Parent Ltd sells to Blue Ltd, Green Ltd and Yellow Ltd at cost price (i.e. the inventory sold cost Parent Ltd a total of $300 000).

 

When recording consolidation entries for the current financial year, the group accountant eliminates intragroup sales for a total of $240 000 (i.e. 100% of the sale to Blue, 80% of the sale to Green and 60% of the sale to Yellow).

 

Is this correct? If so, why? If not, what should be the correct value and why should it be this?

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