On 31 December 2015 the end of the reporting period, P Ltd holds an interest of 80% in S Ltd. On 2 January 2015, P Ltd sold certain equipment which originally cost R10 000 to S Ltd for R15 000.S Ltd recognises depreciation on this equipment on a straight line basis at a rate of 20% per annum. The portion of unrealized intragroup profit realized by the depreciation process during 2015 will be?
To calculate the portion of unrealized intragroup profit realized by the depreciation process during 2015, we need to determine the original cost of the equipment and the accumulated depreciation for the year.
The original cost of the equipment was R10,000, and it was sold to S Ltd for R15,000. This means there was a profit of R5,000 on the sale.
To calculate the accumulated depreciation for the year, we need to multiply the original cost of the equipment by the depreciation rate of 20%.
Accumulated depreciation = Original cost * Depreciation rate
Accumulated depreciation = R10,000 * 0.20
Accumulated depreciation = R2,000
Therefore, the portion of unrealized intragroup profit realized by the depreciation process during 2015 is R2,000.