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Unrealized profit is calculated on stock on hand available at year end purchased from group company.
In this case where subsidiary sold80% goods to third party and20% returned to parent company straight forwardly guide towards that no stock on hand available in subsidiary at year-end. Elaborated below:
Total purchased from Parent : $6000 (6000 x80% /80%)
Total Sold to3rd party (COGS) : $4800 (6000 x80%)
Total returned to parent Co : $1200 (6000 x20%)
Therefore no unrealized profit to be reported at year-end while consolidating the financial statements.
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