Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following? $\begin{array}{llrr}
\text { Accumulated depreciation } & \mathrm{Dr} & 15000 & \
\text { Gain on sale } & \mathrm{Dr} & 5000 & 20000 \
\quad \text { Plant } & \mathrm{Cr} & & \
\text { Deferred tax asset } & \mathrm{Dr} & 1500 & \
\text { Income tax expense } & \mathrm{Cr} & &1500
\end{array}$
$\begin{array}{clcc}
\text { Accumulated depreciation } & \mathrm{Dr} & 1250 & \
\text { Depreciation expense } & \mathrm{Cr} & & 1250 \
\text { Incometax expense } & \mathrm{Dr} & 375 & \
\text { Deferred tax asset. } & \mathrm{Cr} & &375
\end{array}$

Question

Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following?  $\begin{array}{llrr}
\text { Accumulated depreciation } & \mathrm{Dr} & 15000 & \
\text { Gain on sale } & \mathrm{Dr} & 5000 & 20000 \
\quad \text { Plant } & \mathrm{Cr} & & \
\text { Deferred tax asset } & \mathrm{Dr} & 1500 &  \
\text { Income tax expense } & \mathrm{Cr} & &1500
\end{array}$
$\begin{array}{clcc}
\text { Accumulated depreciation } & \mathrm{Dr} & 1250 & \
\text { Depreciation expense } & \mathrm{Cr} & & 1250 \
\text { Incometax expense } & \mathrm{Dr} & 375 &  \
\text { Deferred tax asset. } & \mathrm{Cr} & &375 
\end{array}$

Quizplus · Accepted Answer

The Answer of Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following?  $\begin{array}{llrr}
\text { Accumulated depreciation } & \mathrm{Dr} & 15000 & \
\text { Gain on sale } & \mathrm{Dr} & 5000 & 20000 \
\quad \text { Plant } & \mathrm{Cr} & & \
\text { Deferred tax asset } & \mathrm{Dr} & 1500 &  \
\text { Income tax expense } & \mathrm{Cr} & &1500
\end{array}$
$\begin{array}{clcc}
\text { Accumulated depreciation } & \mathrm{Dr} & 1250 & \
\text { Depreciation expense } & \mathrm{Cr} & & 1250 \
\text { Incometax expense } & \mathrm{Dr} & 375 &  \
\text { Deferred tax asset. } & \mathrm{Cr} & &375 
\end{array}$

Abra Ltd Sold an Item of Plant to Its Subsidiary