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What should be the correct value and why should it be this

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Reference no: EM132841201

Question - 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?

Reference no: EM132841201

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