During the Year Ended 30 June 2022, a Subsidiary Entity

question 32

Multiple Choice

During the year ended 30 June 2022, a subsidiary entity sold inventories to a parent entity for $50 000. The inventories had previously cost the subsidiary entity $45 000. By 30 June 2022 the parent entity had sold all the inventories to a party outside the group. The company tax rate is 30%. The adjustment entry in the consolidation worksheet at 30 June 2023 is:

• A) \(\begin{array}{llr}\text { Sales revenue }&\mathrm{Dr}&50,000\\
• \text { Cost of sales } & \mathrm{Cr} && 45,000 \\
• \text { Inventories } & \mathrm{Cr} && 5,000\\
• \text { Deferred tax asset }&\mathrm{Dr}&1,500\\
• \text { Income tax expense }& \mathrm{Cr}&&1,500\\
• \end{array}\)
• B) \(\begin{array}{lll}
• \text { Retained earnings } & \text { Dr } & 3500 \\
• \text { Income tax expense } & \mathrm{Dr} & 1500 \\
• \text { Cost of sales } & \mathrm{Cr} &5000
• \end{array}\)
• C) \[\begin{array} { c l c c }
• \text { Retained earriirigs } & \mathrm { Dr } & 5000 \\
• \text { Irventories } & \mathrm { Cr } & & 5000 \\
• \text { Deferted tax asset } & \mathrm { Dr } & 1500 & \\
• \text { Retained earriirgs } & \mathrm { Cr } & & 1500
• \end{array}\]
• D) No entry is required

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Definitions:

Scanning the Situation

The process of carefully examining and assessing the current state or conditions of an environment or situation to identify key elements and challenges.

Forecasting

Forecasting involves making predictions about future events or trends based on current and historical data analysis.

Stakeholder Audit

An evaluation process that identifies and assesses the interests and influences of individuals or groups that have a stake in the outcomes of a project or company.

Evaluating Alternatives

The process of critically examining different options or courses of action to determine their potential effectiveness in achieving a desired outcome.