Belgium Ltd Owns All the Issued Capital of Chocolate Ltd

Multiple Choice

Belgium Ltd owns all the issued capital of Chocolate Ltd.During the period ended 30 June 2015,Belgium Ltd sold Chocolate Ltd inventory that had a cost of $200 000 for $270 000.At the end of the current period Chocolate Ltd had 75% of that inventory still on hand; the rest was sold to entities external to the group.During the previous period Chocolate Ltd had sold inventory to Belgium Ltd at a profit of $49 000.At the end of that period (30 June 2014) Belgium Ltd still had 40% of that inventory on hand.That entire inventory was sold to parties external to the group during the current year.The taxation rate is 30% and both companies use a perpetual inventory system. What consolidation journal entries are required to eliminate the effects of these transactions for the period ended 30 June 2015?

A)
$$\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Sales } & 270000 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 270000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Cost of goods sold } & 52500 & \\\hline \mathrm { Cr } & \text { Purchases } & & 52500 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 17750 & \\\hline \mathrm { Cr } & \text { Deferred income tax asset } & & 17750 \\\hline & & & \\\hline \mathrm { Dr } & \text { Inventory } & 19600 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 19600 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 5880 & \\\hline \mathrm { Cr } & \text { Deferred income tax asset } & & 5880 \\\hline\end{array}$$
B)
$$\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Sales } & 270000 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 270000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Cost of goods sold } & 17500 & \\\hline \mathrm { Cr } & \text { Purchases } & & 17500 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 5250 & \\\hline \mathrm { Cr } & \text { Deferred income tax asset } & & 5250 \\\hline & & & \\\hline \mathrm { Dr } & \text { Purchases } & 29400 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 29400 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 8820 & \\\hline \mathrm { Cr } & \text { Deferred income tax asset } & & 8820 \\\hline\end{array}$$
C)
$$\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Sales } & 270000 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 270000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Cost of goods sold } & 17500 & \\\hline \mathrm { Cr } & \text { Purchases } & & 17500 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 5250 & \\\hline \mathrm { Cr } & \text { Deferred income tax asset } & & 5250 \\\hline & & & \\\hline \mathrm { Dr } & \text { Opening retained earnings } & 49000 & \\\hline \mathrm { Cr } & \text { Closing retained earnings } & & 49000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Purchases } & 29400 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 29400 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 8820 & \\\hline \mathrm { Cr } & \text { Deferred income tax asset } & & 8820 \\\hline\end{array}$$
D)
$$\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Sales } & 270000 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 270000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Cost of goods sold } & 52500 & \\\hline \mathrm { Cr } & \text { Inventory } & & 52500 \\\hline & & & \\\hline \mathrm { Dr } & \text { Deferred income tax asset } & 15750 & \\\hline \mathrm { Cr } & \text { Income tax expense } & & 15750 \\\hline & & & \\\hline \mathrm { Dr } & \text { Opening retained earnings } & 19600 & \\\hline \mathrm { Cr } & \text { Cost of goods sold } & & 19600 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & 5880 & \\\hline \mathrm { Cr } & \text { Opening retained earnings } & & 5880 \\\hline\end{array}$$