A Subsidiary Sold Inventory to a Parent Entity for €10

question 13

Multiple Choice

A subsidiary sold inventory to a parent entity for €10 000. The inventory originally cost the subsidiary €6000. At the end of the reporting period the parent had sold 50% of the inventory to an external party. The company tax rate is 30%. The deferred tax item that is recognised on consolidation is:

• A) CR Deferred tax liability €1 200
• B) CR Deferred tax liability €600
• C) DR Deferred tax asset €1 200
• D) DR Deferred tax asset €600.

Identify which costs are included in the cost of products manufactured under the absorption costing concept.

Distinguish between variable and absorption costing in the treatment of fixed and variable costs.

Recognize how variable and absorption costing impact the income statement presentation, specifically gross profit, contribution margin, and net profit.

Understand the application of variable and absorption costing in determining the cost of goods sold.