Reference no: EM132901266

HI sold goods to SD, its 100% owned subsidiary on 1 February 20X1. The goods were sold to ST for £48,000. HI made a profit of 33.33% on the original cost of the goods.

• At the year end, 30 June 20X1, 40% of the goods had been sold by ST, the balance were still in ST's inventory and ST had not paid for any of the goods.

Problem 1: Which ONE of the following states the correct adjustments required in the HI group's consolidated statement of financial position at 30 June 20X1?

A) Reduce inventory and retained earnings by £7,200 and Reduce payables and receivables by £7,200
B) Reduce inventory and retained earnings by £9,600 and Reduce payables and receivables by £9,600
C) Reduce inventory and retained earnings by £7,200 and Reduce payables and receivables by £48,000
D) Reduce inventory and retained earnings by £9,600 and Reduce payables and receivables by £48,000