A subsidiary sold inventory to its parent for $50 000.The inventory originally cost the subsidiary $38 000.At balance sheet date,the parent had sold 50% of the inventory to an external party.The company tax rate is 30%.Which of the following is the deferred tax item that is recognised on consolidation?
A)Cr Deferred tax liability $3600
B)Cr Deferred tax liability $1800
C)Dr Deferred tax asset $3600
D)Dr Deferred tax asset $1800

Question

Quizplus · Accepted Answer

The unrealized profit on the remaining inventory is $6,000 ($12,000 profit on $50,000 sale, half unsold). The deferred tax asset is calculated as $6,000 x 30% = $1,800.

A Subsidiary Sold Inventory to Its Parent for $50 000