Suppose in Problem 3, JPL sold a machinery to GL, on which it earned a profit of ₹80,000. The useful life of the asset is five years. JPL holds 40% equity in GL. Show how unrealized profit is to be recognized in the year 2010–11.

Data from Problem 3

Gee Limited (GL) is an associate of Jee Pee Limited (JPL). During the year GL sold goods of selling price ₹1,00,000 to JPL. On March 31, 2011 closing stock of JPL comprised stock amounting to ₹30,000 out of the goods purchased from GL. Financial statements of GL disclose a gross profit margin of 20% for the year 2010–11, whereas JPL has gross profit margin of 25%. Show how unrealized profit is to be eliminated by JPL on March 31, 2011 when JPL holds 40% shares of GL.