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