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?
Select one:
a. R1 000
b. R2 000
c. R3 000
d. R5 000
The portion of unrealized intragroup profit realized by the depreciation process during 2015 can be calculated as follows:
Original cost of equipment sold = R10,000
Selling price of equipment = R15,000
Profit on sale = Selling price - Original cost = R15,000 - R10,000 = R5,000
P Ltd holds an interest of 80% in S Ltd, so the portion of unrealized intragroup profit that S Ltd recognizes is 80% of R5,000.
Portion of unrealized intragroup profit realized by the depreciation process during 2015 = 80% of R5,000 = R4,000
Therefore, the answer is not available in the given options.