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Question: when preparing consolidated financial statements adjustments for preacquisition equity and...
Question details
When preparing consolidated financial statements, adjustments for pre-acquisition equity and inter-entity transactions are recorded:
Select one:
a.
in the accounting records of the parent entity
b.
in the accounting records of the subsidiary
c.
on a consolidation worksheet
d.
in the accounting records of the reporting entity
A subsidiary entity sold inventory to a parent entity for $30 000. The inventory had previously cost the subsidiary entity $24 000. By reporting date, the parent entity had sold 75% of the inventory to a party outside the group. The company tax rate is 30%. The adjustment entry in the consolidation worksheet at reporting date is:
Select one:
a.
| Sales revenue | Dr | 30 000 | |
| Cost of sales | Cr | 24 000 | |
| Inventory | Cr | 6 000 | |
| Deferred tax asset | Dr | 1 800 | |
| Income tax expense | Cr | 1 800 |
b.
| Sales revenue | Dr | 30 000 | |
| Cost of sales | Cr | 28 500 | |
| Inventory | Cr | 1 500 | |
| Deferred tax asset | Dr | 450 | |
| Income tax expense | Cr | 450 |
c.
| Sales revenue | Dr | 22 500 | |
| Cost of sales | Cr | 18 000 | |
| Inventory | Cr | 4 500 | |
| Deferred tax asset | Dr | 1 350 | |
| Income tax expense | Cr | 1 350 |
d.
| Sales revenue | Dr | 7 500 | |
| Cost of sales | Cr | 6 000 | |
| Inventory | Cr | 1 500 | |
| Deferred tax asset | Dr | 450 | |
| Income tax expense | Cr | 450 |
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