A Subsidiary Sold Inventories to Its Parent for $50 000

question 14

Multiple Choice

A subsidiary sold inventories to its parent for $50 000. The inventories originally cost the subsidiary $38 000. At balance sheet date, the parent had sold 50% of the inventories to an external party. The company tax rate is 30%. Which of the following is the deferred tax item that is recognised on consolidation?

• A) Cr Deferred tax liability $3600
• B) Cr Deferred tax liability $1800
• C) Dr Deferred tax asset $3600
• D) Dr Deferred tax asset $1800

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Definitions:

Base of Support

The area beneath an object or person that provides support and stability.

Narrows

A geographical feature where a body of water is constricted between two landforms.

Bedridden

A state in which a person is unable to rise from bed due to illness or disability.

Eccentric Tension

A type of muscle contraction where the muscle elongates while under tension, often engaged during the lowering phase of a lift.