For 20X8, Post reported $90,000 of intercompany sales (25 percent markup on cost and fully paid for by year-end) to Script, which reported $30,000 of intercompany acquired inventory at 12/31/X8. The unrealized profit at 12/31/X8 is

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Jocelyn Bowman

Business

18 February, 10:58

For 20X8, Post reported $90,000 of intercompany sales (25 percent markup on cost and fully paid for by year-end) to Script, which reported $30,000 of intercompany acquired inventory at 12/31/X8. The unrealized profit at 12/31/X8 is

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Emerson Bradley · Answer 1

The unrealized profit is $6000

Explanation:

From the question, it is clear that Script still has in inventory at year end $30,000 worth of inventory from the $90,000 worth of purchased from Post,

invariably the unrealized profit recognizable should be to the tune of the unsold inventory.

In addition, the fact that mark up is 25% which that sales figure is made up of 100% cost plus 25% markup, hence sales is 125%.

unrealized profit=unsold inventory*markup/sales in percentage

unrealized profit = $30,000*25/125

unrealized profit is $6,000