On 1 January 20X2 A Ltd acquired all the issued shares in B Ltd. At that date the inventory of B Ltd had a carrying amount $5000 lower than its fair value. The inventory was all sold by 30 June 20X4. At 30 June 20X5 the consolidation adjustment against inventory in relation to the transaction will be:
A) a debit of $5000
B) a credit of $5000
C) a debit of $3500
D) nothing

Question

Quizplus · Accepted Answer

Since all the inventory that had a carrying amount $5000 lower than its fair value was sold by 30 June 20X4, there would be no inventory left to adjust by 30 June 20X5. Therefore, no consolidation adjustment is required against inventory at that date.

On 1 January 20X2 a Ltd Acquired All the Issued