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Sir , is it in every condition where goods are sold at a $ figure maybe mark-up or margin and there is none of these goods in inventory at the year end that we have purp Zero like the example 2 where Sigmantas had none of thses goods in inventory. I also, did got 800 as purp.
Imagine this:
Parent buys, adds a mark up and sells to subsidiary
Subsidiary buys from parent, adds a mark up and sells to outside world
Add across the inventory for the two entities but there’s no intra-group items in inventory
Where’s the UNREALISED profit?
Now this:
Parent buys, adds a mark up and sells to subsidiary
Subsidiary buys from parent but doesn’t sell any.
Now when we add across there ARE items in inventory that are valued by the buying entity at cost to that entity whereas they should be valued at cost to the group
So NOW we have an unrealised profit to eliminate
Does that answer you?
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