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;
O a. R1 000
O b. R2 000
O c. R3 000
O d. R5 000
The portion of unrealized intragroup profit realized by the depreciation process during 2015 can be determined by calculating the depreciation expense for the equipment sold by P Ltd to S Ltd.
The equipment originally cost R10,000 and was sold to S Ltd for R15,000, resulting in an unrealized profit of R5,000 (R15,000 - R10,000).
The depreciation expense for the equipment can be calculated by multiplying the cost of the equipment by the depreciation rate:
Depreciation expense = R10,000 * 20% = R2,000
Therefore, the portion of unrealized intragroup profit realized by the depreciation process during 2015 is R2,000.
Answer: O b. R2,000