Ali Ltd Sold an Item of Plant to Its Subsidiary

Multiple Choice

Ali Ltd sold an item of plant to its subsidiary Baba Ltd on 1 January 2017 for $100 000. The asset had cost Ali Ltd $120 000 when acquired on 1 January 2015. At that time the remaining useful life of the plant was assessed at 5 years. The adjustment necessary on consolidation as at 30 June 2018 in relation to the sale of plant will result in:

A) an increase in retained earnings and a decrease in current year profit.
B) a decrease in retained earnings and an increase in current year profit.
C) an increase in retained earnings and an increase in current year profit.
D) a decrease in retained earnings and a decrease in current year profit.