A subsidiary has sold goods to its parent during the year for 25,000 with a 32% gross profit margin. At the start of the year the parent company had goods in inventory valued at 18,000, bought from the subsidiary the previous year. The subsidiary's gross profit margin the previous year was 39%. At the end of the year there are no goods bought from the subsidiary left in the parent company's inventory. The tax rate is 20%. How should the different profit items be adjusted to arrive at the consolidated income statement and statement of financial position, as regards the internal transactions?

Answer rating: 100% (QA)

To adjust the profit items for internal transactions between the subsidiary and the parent company f... View the full answer