Final answer:
The sale of inventory with unrealized profit in the previous year affects the current year's profit, as the intra-group profit from the prior year's sale needs to be realized and eliminated when the inventory is sold to an outside party.
Step-by-step explanation:
The question pertains to intra-group transactions and how the sale of inventory with unrealized profit in the prior year affects financial statements in the current year. When inventory is sold to a member within the same group, and the inventory remains unsold to an external party at the year-end, unrealized profit is included in the inventory's carrying amount on the balance sheet. This unrealized profit affects the accuracy of the reported profit in the subsequent year when this inventory is sold.
An unrealized profit in the opening inventory that is sold during the current year will decrease the reported profit for that year, because the profit margin on the intercompany sale must be eliminated. The correct answer to how the sale of inventory in the previous year with unrealized profit in opening inventory impacts the current year is: a. Affects the current year's profit. This is because when the inventory is sold to an external party, the intra-group profit needs to be realized and thus eliminated from the group's consolidated financial statements.