Wagner Ltd Owns 100% of Korngold Ltd $\quad$ Credit Inventory
C) Debit Opening Retained Profits

question 21

Multiple Choice

Wagner Ltd owns 100% of Korngold Ltd.For the year ended 30 April 20X1, Korngold Ltd reported a profit of $1 million.On 30 April 20X0, Korngold Ltd had sold inventory to Wagner Ltd for a $0.6 million profit.All of this inventory was sold by Wagner Ltd on 1 June 20X0.For the financial year ending in 20X3, what is the consolidation adjustment (if any) in the financial statements, as a result of the profit on this sale?

• A)None, because all inventory was sold
• B) Debit sales and cost of sales
• \(\quad\)Credit inventory
• C) Debit opening retained profits
• \(\quad\)Credit inventory
• D)Debit inventory
• \(\quad\)Credit cost of sales

---

Definitions:

Habit

A repetitive behavior that an individual performs regularly, often without much conscious thought.

Pleasure Principle

In psychoanalytic theory, it is the driving force of the id that seeks immediate gratification of all desires, wants, and needs.

Guilt/Pride Principle

Refers to the internal motivators of guilt and pride that can encourage conformity to social norms and personal standards.

Ego Ideal

The part of the personality that consists of the standards of perfection and aspirations a person aims to achieve.