On 1 January 2021, Gemma Ltd Sells Inventories to Its

question 6

Multiple Choice

On 1 January 2021, Gemma Ltd sells inventories to its subsidiary, Tess Ltd, for $24 000. The inventories cost Gemma Ltd $20 000 earlier in the current year. Tess Ltd intends to use the item as plant with a useful life of 10 years. The estimated salvage value of the plant is zero and the straight-line method of depreciation will be applied. The tax rate is 30%. The worksheet entry for the year ended 30 June 2021 would include the following adjustment:

• A) DR Plant $4 000.
• B) CR Plant $4 000.
• C) DR Inventories $4 000.
• D) CR Inventories $4 000.

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