During the Year Ended 30 June 2017, a Subsidiary Sold

question 28

Short Answer

During the year ended 30 June 2017, a subsidiary sold inventories to a parent for $90 000. The inventories had previously cost the subsidiary entity $72 000. By 30 June 2017 the parent had sold 75% of the inventories to a party outside the group. The remaining inventories were sold externally in July 2017. The company tax rate is 30%. Which of the following is the adjustment entry in the consolidation worksheet at 30 June 2018? $\begin{array}{lllr}\text { Sales revenue } & \mathrm{Dr} & 90000 & \\\text { Cost of sales } & \mathrm{Cr} & & 85500 \\\text { Inventories } & \mathrm{Cr} & & 4500 \\\text { Deferred tax asset } & \mathrm{Dr} & 1350 & \\\text { Income tax expense } & \mathrm{Cr} & & 1350\end{array}$

$\begin{array}{llll}\text { Retained earnings } & \mathrm{Dr} & 4200 \\\text { Income tax expense } & \mathrm{Dr} & 1800 \\\quad \text { Cost of sales } & \mathrm{Cr} & &6000 \\\text { Retained earnings } & & & \\\text { Income tax expense } & \mathrm{Dr} & 3150 \\\quad \text { Cost of sales } & \mathrm{Dr} & 1350 \\& \mathrm{Cr} & & 4500\end{array}$


$\begin{array}{llll}\text { Retained earnings } & \mathrm{Dr} & 4500 \\\quad \text { Inventories } & \mathrm{Cr} & & 4500 \\\text { Deferred tax asset } & \mathrm{Dr} & 1350 & \\\text { Retained earnings } & \mathrm{Cr} & & 1350\end{array}$

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Definitions:

Primary Drives

Basic, innate motivations that are essential for survival, such as hunger, thirst, and the need for sleep.

Ventromedial Nucleus

A region of the hypothalamus involved in regulating metabolism, including appetite and energy expenditure.

Lateral Hypothalamus

A region of the brain involved in controlling hunger and thirst; it plays a crucial role in the regulation of feeding behavior.

Pituitary Gland

The gland that secretes growth hormone, prolactin, antidiuretic hormone, and other hormones.