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Question: when preparing consolidated financial statements adjustments for preacquisition equity and...

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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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