During the Year Ended 30 June 2022, a Subsidiary Entity

question 25

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 75% of 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) \[\begin{array} { l l c r }
• \text { Sales reverue } & \mathrm { Dr } & 50000 \\
• \text { Cost of sales } & \mathrm { Cr } & & 48750 \\
• \text { Irventories } & \mathrm { Cr } & & 1250 \\
• \text { Deferred tax asset } & \mathrm { Dr } & 375 & \\
• \text { Income tax expense } & \mathrm { Cr } & & 375
• \end{array}\]
• B) \[\begin{array} { l l l }
• \text { Retained earnings } & \mathrm { Dr } & 3500 \\
• \text { Income tax expense } & \mathrm { Dr } & 1500 \\
• \text { Cost of sales } & \mathrm { Cr } &5000
• \end{array}\]
• C) \[\begin{array} { l l l }
• \text { Retained earrings } & \mathrm { Dr } & 875 \\
• \text { Incorne tax expense } & \mathrm { Dr } & 375 \\
• \text { Cost of sales } & \mathrm { Cr } &1250
• \end{array}\]
• D) \[\begin{array} { c l c c }
• \text { Retained earnings } & \mathrm { Dr } & 1250 \\
• \text { Irventories } & \mathrm { Cr } & 1250 \\
• \text { Deferred tax asset } & \mathrm { Dr } & 375 \\
• \text { Retained earnings } & \mathrm { Cr } & 375
• \end{array}\]

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