Question $1$: Chapter $6-$ Inter$-$company Inventory Transactions $(20$ marks$)$

$($Hint: you might wish to consult the PAT and SAT video and$/$or video script before you try the problem$)$

On January $1,$ Year $2,$ P Ltd$.$ acquired $90\%$ of S Inc. when S$\text{'}$s retained earnings were $$910,000.$ There was no acquisition differential. P accounts for its

investment under the cost method. $S$ sells inventory to $P$ on a regular basis at a markup of $30\%$ of selling price. The inter$-$company sales were $$50,000$ in Year $2$

and $$80,000$ in Year $3.$ The total amount owing by P related to these inter$-$company sales was $$10,000$ at the end of Year $2$ and $$8,000$ at the end of Year $3.$ On

January $1,$ Year $3,$ the inventory of P contained goods purchased from S amounting to $$10,000,$ while the December $31,$ Year $3,$ inventory contained goods

purchased from $S$ amounting to $$20,000.$ Both companies pay income tax at the rate of $40\%.$

Selected account balances from the records of $P$ and $S$ for the year ended December $31,$ Year $3,$ were as follows:

Account balances

Required:

Prepare the inter$-$company profit analysis for year $3.$

Show the consolidation worksheet entries to recognize and eliminate inter$-$company inventory profits you identified above in part $"$a$"$ for year $3.$

Calculate and report the amount to report on the Year $3$ consolidated financial statements for the selected accounts noted above.