Answer:
Intra-group sales of inventory with unrealized profit in closing inventory reduce the consolidated profit for the current year, as these are not considered realized by the group as a whole and must be eliminated for consolidation purposes.
Step-by-step explanation:
When discussing intra-group transactions, specifically the sale of inventory within a group, the accounting treatment of unrealized profit in closing inventory is important. For the current year, if inventory is sold to another part of the same group at a profit, and this inventory remains unsold at the end of the year, the profit realized on the transaction is not considered realized by the group as a whole. Therefore, for consolidation purposes, this unrealized profit must be eliminated from the consolidated financial statements since the sale is internal and does not reflect an earning from an external entity. As a result, such intra-group sales with unrealized profit in closing inventory would reduce profit for the current year when consolidating the financial statements.