A Ltd holds a 60% interest in B Ltd. B Ltd sells inventories to A Ltd during the year for $10 000. The inventories originally cost $7 000. At the end of the year 50% of the inventories are still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction is a debit to NCI of:
A) Nil.
B) $420.
C) $630.
D) $1 050.

Question

Quizplus · Accepted Answer

The unrealized profit on the inventories still on hand is $1,500 ($3,000 * 50%). The NCI's share of this unrealized profit is 40% (100% - 60% control by A Ltd), which is $600. After accounting for tax (30% of $600 = $180), the NCI adjustment is $420 ($600 - $180).

A Ltd Holds a 60% Interest in B Ltd