Question
MN Ltd is a parent company of YZ Ltd. The consolidated statement of comprehensive income reveals sales revenue $40 000 and cost of goods sold
MN Ltd is a parent company of YZ Ltd. The consolidated statement of comprehensive income reveals sales revenue $40 000 and cost of goods sold $30 000. The accountant has failed to differentiate normal sales with intra-group sales of $5 000 made by YZ Ltd. The cost of the product was $4 000. Of the product purchased from the subsidiary company, 30% has remained in the inventory at the year end. What is the effect of the intra-group transaction on the gross profit? A) To be reduced by $300 B) To be increased by $300 C) To be reduced by $1 000 D) To be increased by $1 000
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