A Ltd Sells to Its Subsidiary, J Ltd, an Item

question 20

Multiple Choice

A Ltd sells to its subsidiary, J Ltd, an item of inventories on 1 January 2017 for $6 000. The item cost A Ltd $3 000 earlier in the current year. J Ltd intends to use the item as plant with a useful life of 10 years, and no estimated salvage value. A straight-line depreciation rate of 10% p.a. is applicable. The tax rate is 30%. The worksheet entry for the year ended 30 June 2017 would include the following adjustment:

• A) Dr Plant $3 000.
• B) Cr Plant $3 000.
• C) Dr Inventories $3 000.
• D) Cr Inventories $3 000.

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Definitions:

Operating Income

Income generated from the core operations of a business, excluding non-operating revenue and expenses.

Selling Price

The charge or fee extended to the purchaser for a product or service, typically aiming to cover costs and generate profit.

Advertising Budget

The amount of money allocated for promoting a product, service, or brand during a specific period.

Break-even

A position where overall costs and revenues balance out, culminating in zero net profit or loss.