Reference no: EM132971388

Problem 1: Pinball Limited purchased 100% of the shares in Stellar Limited on 1 July 2020. Pinball Limited sold inventories to Stellar Limited in the year ended 30 June 2022 for $16,000 cash. The inventory had cost Pinball Limited $10,000. Stellar Limited has not yet sold the inventory as of 30 June 2022. The tax rate is 30%. The consolidated worksheet prepared at 30 June 2022 will contain the following adjustment entry.

Option a. Dr Revenue $ 16,000
Cr Cost of goods sold $ 6,000
Cr Inventory $ 10,000
Dr Deferred tax asset $ 1,800
Cr Income tax payable $ 1,800

Option b. Dr Inventory $ 10,000
Dr Cost of goods sold $ 6,000
Cr Revenue $ 16,000
Dr Deferred tax liability $ 4,800
Cr Income tax expense $ 4,800

Option c. Dr Revenue $ 16,000
Cr Cost of goods sold $ 10,000
Cr Inventory $ 6,000
Dr Deferred tax asset $ 1,800
Cr Income tax expense $ 1,800

Option d. None of the other options

Option e. Dr Inventory $ 16,000
Cr Cost of goods sold $ 6,000
Cr Revenue $ 10,000
Dr Deferred tax liability $ 1,800
Cr Income tax payable $ 1,800