In May 20X7, a Parent Entity Sold Inventory to a Subsidiary

question 30

Multiple Choice

In May 20X7, a parent entity sold inventory to a subsidiary entity for $30 000. The inventory had previously cost the parent entity $24 000. The entire inventory is still held by the subsidiary at reporting date, 30 June 20X7. Ignoring tax effects, the adjustment entry in the consolidation worksheet at reporting date is:

• A)\(\begin{array} { l l l l }
• \text { Cash } & \mathrm { Dr } & 24,000 & \\
• \quad \text { Sales revenue } & \mathrm { Cr } & & 24,000 \\
• \text { Cost of sales } & \mathrm { Dr } & 24,000 & \\
• \quad \text { Inventory } & \mathrm { Cr } & & 24,000
• \end{array}\)
• B)\(\begin{array} { l l l l }
• \text { Sales revenue } & \mathrm { Dr } & 24,000 & \\
• \quad \text { Cash } & \mathrm { Cr } & & 24,000 \\
• \text { Inventory } & \mathrm { Dr } & 24,000 & \\
• \quad \text { Cost of sales } & \mathrm { Cr } & & 24,000
• \end{array}\)
• C)
• \(\begin{array}{llr}\text { Sales revenue }& \mathrm{Dr}&30,000\\
• \text { Cost of sales } & \mathrm{Cr} & 6,000 \\
• \text { Inventory } & \mathrm{Cr} & 24,000
• \end{array}\)
• D) \(\begin{array}{llr}\text { Sales revenue } & \mathrm{Dr} & 30,000\\
• \text { Cost of sales } & \mathrm{Cr} & 24,000 \\
• \text { Inventory } & \mathrm{Cr} & 6,000
• \end{array}\)

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Definitions:

Instrument

A formal document that serves as a legal evidence of a fact or agreement, such as a contract, deed, will, or promissory note.

Promissory Notes

Written promises to pay a specified sum of money to a certain person or entity under agreed terms.

Negotiated

Discussed or arranged terms and conditions towards an agreement through a process of bargaining.

Assigned

Designated or allocated to someone or something for a specific purpose.