Zeus Plc Owns 100% of the Issued Capital of Ares

question 19

Multiple Choice

Zeus Plc owns 100% of the issued capital of Ares Plc.On 1 July 2012,Zeus Plc purchased an item of equipment from Ares Plc for €800 000.Ares had owned the equipment for 2 years.It originally cost €890 000 and the accumulated depreciation was €178 000 at the time of sale.The equipment has been depreciated over this time,but not written down or revalued.The remaining useful life of the equipment at 1 July 2012 is estimated to be 8 years.Zeus Plc expects the benefits to be obtained from the equipment to be evenly received over its useful life.The tax rate is 30%. What are the consolidation journal entries required for this inter-company transaction for the period ended 30 June 2014?

• A) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Opening retained earnings } & 88000 & \\
• \hline \mathrm { Cr } & \text { Equipment } & & 88000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Accumulated depreciation } & 22000 & \\
• \hline \mathrm { Cr } & \text { Depreciation expense } & & 22000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Income tax expense } & 6600 & \\
• \hline \mathrm { Cr } & \text { Deferred tax asset } & & 6600 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Equipment } & 88000 & \\
• \hline \mathrm { Cr } & \text { Opening retained earnings } & & 88000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Accumulated depreciation } & 25000 & \\
• \hline \mathrm { Cr } & \text { Opening retained earnings } & & 12500 \\
• \hline \mathrm { Cr } & \text { Depreciation expense } & & 12500 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Deferred tax asset } & 3300 & \\
• \hline \mathrm { Dr } & \text { Income tax expense } & 3300 & \\
• \hline \mathrm { Cr } & \text { Opening retained earnings } & & 6600 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Opening retained earnings } & 61600 & \\
• \hline \mathrm { Dr } & \text { Deferred tax asset } & 26400 & \\
• \hline \mathrm { Dr } & \text { Equipment } & 90000 & \\
• \hline \mathrm { Cr } & \text { Accumulated depreciation-equipment } & & 178000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Accumulated depreciation } & 22000 & \\
• \hline \mathrm { Cr } & \text { Opening retained earnings } & & 11000 \\
• \hline \mathrm { Cr } & \text { Depreciation expense } & & 11000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Opening retained earnings } & 3300 & \\
• \hline \mathrm { Dr } & \text { Income tax expense } & 3300 & \\
• \hline \mathrm { Cr } & \text { Deferred tax asset } & & 6600 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Opening retained earnings } & 61600 & \\
• \hline \mathrm { Dr } & \text { Deferred tax asset } & 26400 & \\
• \hline \mathrm { Cr } & \text { Equipment } & & 88000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Accumulated depreciation } & 22000 & \\
• \hline \mathrm { Cr } & \text { Depreciation expense } & & 22000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Opening retained earnings } & 3300 & \\
• \hline \mathrm { Dr } & \text { Income tax expense } & 3300 & \\
• \hline \mathrm { Cr } & \text { Deferred tax asset } & & 6600 \\
• \hline
• \end{array}\]

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A disease or condition that is likely to lead to death, often within a relatively short time.

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The management and alleviation of the signs and symptoms of a disease or condition without necessarily addressing the underlying cause.

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