In May 2017, a Parent Sold Inventories to a Subsidiary

question 26

Short Answer

In May 2017, a parent sold inventories to a subsidiary entity for $60 000. The inventories had previously cost the parent entity $48 000. The entire inventory is still held by the subsidiary at reporting date, 30 June 2017. Ignoring tax effects, which of the following is the adjustment entry in the consolidation worksheet at reporting date? $\begin{array}{llll}\text { Cash } & \mathrm{Dr} & 48000 & \\\text { Sales revenue } & \mathrm{Cr} & & 48000 \\\text { Cost of sales } & \mathrm{Dr} & 48000 & \\\text { Inventories } & \mathrm{Cr} & & 48000\end{array}$

$\begin{array}{llll}\text { Sales revenue } & \mathrm{Dr} & 48000 & \\\quad \text { Cash } & \mathrm{Cr} & & 48000 \\\text { Inventories } & \mathrm{Dr} & 48000 & \\\text { Cost of sales } & \mathrm{Cr} & & 48000\end{array}$

$\begin{array}{llll}\text { Cost of sales } & \mathrm{Dr} & 60000 & \\\text { Sales revenue } & \mathrm{Cr} & & 12000 \\\text { Inventories } & \mathrm{Cr} & &48000\end{array}$

$\begin{array}{llll}\text { Sales revenue } & \mathrm{Dr} & 60000 & \\\text { Cost of sales } & \mathrm{Cr} & & 48000 \\\text { Inventories } & \mathrm{Cr} & &12000\end{array}$

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Definitions:

Co-ownership

The joint ownership of a property or asset by two or more parties who share the benefits and liabilities associated with it.

Married Couples

are two individuals legally wed to each other and recognized as a married unit under the law, with various shared legal rights and obligations.

Broker

An individual or firm that acts as an intermediary between buyers and sellers, typically in financial transactions, real estate, or investment deals.

Agent

represents a person authorized to act on behalf of another, known as the principal, in dealings with third parties, typically in commercial transactions or contractual agreements.