During the Year Ended 30 June 20X7 a Subsidiary Entity

Multiple Choice

During the year ended 30 June 20X7 a subsidiary entity sold inventory to a parent entity for $30 000. The inventory had previously cost the subsidiary entity $24 000. By 30 June 20X7 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 30 June 20X8 is:

A) $\begin{array} { l l c r } \text { Sales revenue } & \mathrm { Dr } & 30,000 & \\\text { Cost of sales } & \mathrm { Cr } & 28,500 \\\text { Inventory } & \mathrm { Cr } & 1500 \\\text { Deferred tax asset } & \mathrm { Dr } & 450 & \\\text { Income tax expense } & \mathrm { Cr } & 450\end{array}$
B) $\begin{array} { l l r l } \text { Retained earnings } & \mathrm { Dr } & 1400 & \\\text { Income tax expense } & \mathrm { Dr } & 600 & \\\text { Cost of sales } & \mathrm { Cr } & & 2000\end{array}$
C) $\begin{array} { l l r l } \text { Retained earnings } & \mathrm { Dr } & 1050 & \\\text { Income tax expense } & \mathrm { Dr } & 450 & \\\quad \text { Cost of sales } & \mathrm { Cr } & & 1500\end{array}$
D) $\begin{array} { l l c r } \text { Retained earnings } & \mathrm { Dr } & 1500 & \\\text { Inventory } & \mathrm { Cr } & 1500 \\\text { Deferred tax asset } & \mathrm { Dr } & 450 & \\\text { Retained earnings } & \mathrm { Cr } & 450\end{array}$