Consolidation – Intra group sale of goods

Hello sir..! Hope you are well.

I have a doubt regarding calculation of UNREALISED PROFIT ON INTRA GROUP SALES in the following question from ACCA Study Hub.

Winter Co purchased 80% of Summer Co on 1 July 20X6. Winter Co made sales of $1,000,000 to Summer Co during 20X6 that were spread evenly through the year. At the year end of 31 December 20X6 20% of these were still in inventory. Winter Co sells its goods on a 25% profit margin.

Which ONE of the following accounting entries will correctly remove intra-group sales and unrealised profit?

A.DR Sales $500,000 CR Cost of sales $450,000 CR Closing inventory $50,000
B.DR Sales $500,000 CR Cost of sales $250,000 CR Closing inventory $250,000
C.DR Sales $1,000,000 CR Cost of sales $950,000 CR Closing inventory $50,000
D.DR Sales $1,000,000 CR Cost of sales $750,000 CR Closing inventory $250,000

Their answer is as follows:

The correct answer is A.

Answer A recognises that only half the sales were made when Summer Co was a subsidiary. Intra group sales is $500,000 = $1,000,000 × 50% because half of the trading was before Summer Co was purchased by Winter Co. Therefore, removal of intra-group sales would be DR Sales $500,000, CR Cost of sales $500,000.

Unrealised profit is $50,000 = $1,000,000 × 25% × 20%.

Removal of unrealised profit would be DR Cost of sales $50,000, CR Closing inventory $50,000.

I don’t understand why they have calculated UNREALISED PROFIT AS $1,000,000 × 25% × 20% = $50,000

Shouldn’t it be calculated as ($1000000*6/12) * 25% * 20% = 25000

Since this is a case of midyear acquisition, shouldn’t the unrealised profit be calculated only on the post acquisition sale made within the group that is unsold at the year end.

Or are they simply saying that 20% of $1 million (i.e. $0.2 million), of the total post aquisition sale of $0.5 million, is still in inventory .