A Subsidiary Entity Sold Inventory to a Parent Entity for $30

question 8

Multiple Choice

A subsidiary entity sold inventory to a parent entity for $30 000. The inventory had previously cost the subsidiary entity $24 000. By reporting date the parent entity had sold 75% of the inventory to a party outside the group. The company tax rate is 30%. The adjustment entry in the consolidation worksheet at reporting date is:

• A)\(\begin{array} { l l l r }
• \text { Sales revenue } & \mathrm { Dr } & 30000 & \\
• \quad \text { Cost of sales } & \mathrm { Cr } & 24000 \\
• \quad \text { Inventory } & \mathrm { Cr } & 6000 \\
• \text { Deferred tax asset } & \mathrm { Dr } & 1800 & \\
• \quad \text { Income tax expense } & \mathrm { Cr } &1800
• \end{array}\)
• B)\(\begin{array} { l l c r }
• \text { Sales revenue } & \mathrm { Dr } & 30000 & \\
• \quad \text { Cost of sales } & \mathrm { Cr } & 28500 \\
• \text { Inventory } & \mathrm { Cr } &1500 \\
• \text { Deferred tax asset } & \mathrm { Dr } & 450 & \\
• \text { Income tax expense } & \mathrm { Cr } & 450
• \end{array}\)
• C)\(\begin{array} { l l c r }
• \text { Sales revenue } & \mathrm { Dr } & 22500 & \\
• \quad \text { Cost of sales } & \mathrm { Cr } & 18000 \\
• \text { Inventory } & \mathrm { Cr } & 4500 \\
• \text { Deferred tax asset } & \mathrm { Dr } & 1350 & \\
• \text { Income tax expense } & \mathrm { Cr } & 1350
• \end{array}\)
• D) \(\begin{array} { l l c c }
• \text { Sales revenue } & \mathrm { Dr } & 7500 & \\
• \text { Cost of sales } & \mathrm { Cr } & 6000 \\
• \text { Inventory } & \mathrm { Cr } & 1500 \\
• \text { Deferred tax asset } & \mathrm { Dr } & 450 & \\
• \text { Income tax expense } & \mathrm { Cr } & 450
• \end{array}\)

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Definitions:

Flare Bevel-Groove

A type of groove weld where one piece is curved, and its edge is welded to the flat surface of another piece, often used for pipes or tubes.

Flange Welds

Welds that join flanges, which are plates or rings to form a rim or edge, to other components.

Flange Dimension

The specific measurement related to the size, thickness, or diameter of a flange, which is a projecting flat rim or collar used for attachment.

Seam Weld

A welding technique used to join two pieces of metal together along a continuous line by heating with an electric arc, laser, or other methods.