Jameson Purchased Goods from Its Subsidiary for €10 000

question 3

Multiple Choice

Jameson purchased goods from its subsidiary for €10 000. The goods cost the subsidiary €6000. At reporting date, Jameson still held all of the goods. The company rate of tax is 30%. Which of the following consolidation adjustment entries is correct?

• A) DR Income tax expense €1 200, CR Deferred tax liability €1 200
• B) DR Income tax expense €1 200, CR Deferred tax asset €1 200
• C) DR Deferred tax asset €1 200, CR Income tax expense €1 200
• D) DR Deferred tax liability €1 200, CR Income tax expense €1 200.

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Definitions:

Financial Position

A snapshot of a company's assets, liabilities, and equity at a specific point in time, illustrating its economic standing.

Statement of Income

A financial document outlining a company's revenues, expenses, and net income over a specific period.

Changes in Equity

Adjustments in the value of a company's shareholders' equity over a period due to investments, distributions, and earnings.

Net Income

The net income of a company, which is the amount left over from revenue after deducting all costs and taxes.