If an entity sells a non-current asset at a profit to another entity within the same group, which of the following consolidation adjustments is necessary to reflect the tax effect?
A) Dr Deferred tax asset
B) Dr Deferred tax liability
C) Dr Tax expense
D) Cr Deferred tax asset

Question

Quizplus · Accepted Answer

When a non-current asset is sold at a profit within the same group, a deferred tax asset is recognized because the profit is eliminated in consolidation, creating a temporary difference that will reverse in the future.

If an Entity Sells a Non-Current Asset at a Profit