A Ltd sold an item of plant to its subsidiary, B Ltd, on 1 January 2017 for $25 000. The asset had cost A Ltd $30 000 and had an useful life of 6 years when acquired on 1 January 2015 from an external party. The adjustment necessary on consolidation in relation to the transfer of plant as at 30 June 2017 will result in:

Question

Quizplus · Accepted Answer

The sale of the plant to the subsidiary at a profit results in an unrealized gain that needs to be eliminated on consolidation. This adjustment decreases the current year profit and the carrying amount of non-current assets.

A Ltd Sold an Item of Plant to Its Subsidiary