On 16 May 2014,Zebra Ltd Sold Equipment to Its Subsidiary

question 44

Multiple Choice

On 16 May 2014,Zebra Ltd sold equipment to its subsidiary Nando Ltd for $100 000,this asset having a carrying amount at time of sale of $80 000.The equipment was regarded by Zebra Ltd as a depreciable non-current asset,being depreciated at 10% p.a.on cost,whereas Nando Ltd records the machinery as inventory.The asset was sold by Nando Ltd before 30 June 2014.The worksheet entry for the year ended 30 June 2014 would include which of the following adjustments?

• A)Dr Cost of sales 20 000
• B)Cr Cost of sales 20 000
• C)Dr Inventory 20 000
• D)Cr Inventory 20 000

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Definitions:

Working Capital Investment

The funds invested in the short-term assets of a company, such as inventory and receivables, to support its daily operations.

Salvage Value

The estimated residual value of an asset at the end of its useful life, important for calculating depreciation.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows or to evaluate the attractiveness of an investment.

Incremental Cost Approach

A decision-making process that focuses on the changes in total cost resulting from a specific business decision, considering only the relevant costs and benefits that differ between alternatives.