CASE STUDY CONSOLIDATION ADJUSTMENTS Jessica Ltd sold inventories during the current period to its wholly owned subsidiary, Amelie Ltd, for $15000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd, an external entity, for $8000. The income tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate consolidation adjustment entries are as follows. Sales Dr 15 000 Cost of sales Cr 13 000 Inventories Cr 2 000 Deferred tax asset Dr 300 Income tax expense Cr 300 Required 1. Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entries. 2. Determine the consolidation worksheet entries in the following period, assuming the remaining inventories are on-sold to external parties, and explain the adjustments on a line-by-line basis. CASE STUDY