Reference no: EM133171169
Question - On 1 January 2012, Cowboys Ltd acquired all the issued shares in Magpies Ltd. After that date, Cowboys Ltd purchased inventory at price of $80 000, then sold inventory to Magpies Ltd with a profit of $20 000. The inventory is reported as a current asset on balance sheet.
By 30 June 2012, 75% of the inventory was sold to an entity outside of the group. How did the consolidation adjustments affect profit or loss for the year ended June 30, 2013?
On 1 January 2012, Cowboys Ltd acquired all the issued shares in Magpies Ltd. After that date, Cowboys Ltd purchased inventory at price of $80 000, then sold inventory to Magpies Ltd with a profit of $20 000. The inventory is reported as a current asset on balance sheet.
By 30 June 2012, 75% of the inventory was sold to an entity outside of the group. How did the consolidation adjustments affect profit or loss for the year ended June 30, 2013?
A. profit is decreased by $5 000 after the adjustment
B. profit is increased by $5 000 after the adjustment
C. profit is decreased by $3 500 after the adjustment
D. profit is increased by $3 500 after the adjustment
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