Knights Ltd Purchased Inventories from Its Subsidiary, Gidley Ltd, for $20

question 46

Multiple Choice

Knights Ltd purchased inventories from its subsidiary, Gidley Ltd, for $20 000. The goods originally cost Gidley Ltd $12 000. The company tax rate is 30%. Assuming that all of the inventories were still on hand at the end of the year, which of the following consolidation adjustment entries is required?

• A) Dr Tax expense $2400; Cr Deferred tax liability $2400
• B) Dr Tax expense $2400; Cr Deferred tax asset $2400
• C) Dr Deferred tax asset $2400; Cr Tax expense $2400
• D) Dr Deferred tax liability $2400; Cr Tax expense $2400