8

Period Limited has the following property, plant and equipment (PPE) on its books as at 31 December 2014

Cost $10,000

Accumulated depreciation 2,000

Net book amount $ 8,000

The plant is being depreciated over 10 years.

On 1 January 2015 the plant is sold to Period Limiteds subsidiary Session Limited, for $12,000. Session depreciated the plant over 8 years as from 1 January 2015.

Which of the following statements best describes the elimination of the intra-group transfer of the plant at balance date 31 December 2015:

Select one:

a. The consolidation adjustment would eliminate the internal profit $4,000 and internal sales of $12,000. No other adjustments are necessary.

b. The consolidation adjustment would eliminate the internal profit $4,000; $3,500 against the carrying amount of the plant. An adjustment for deferred tax is also required. No other adjustments are necessary.

c. No consolidation adjustment is necessary.

d. The consolidation adjustment would eliminate the internal profit $4,000; $3,500 against the carrying amount of the plant, $500 adjustment for lower depreciation because the new cost has increased. No other adjustments are necessary.

e. The consolidation adjustment would eliminate the internal profit $4,000; $3,500 against the carrying amount of the plant, $500 adjustment for lower depreciation because the new cost has increased. An adjustment for deferred tax is also required. No other adjustments are necessary.

f. The consolidation adjustment would eliminate the internal profit $4,000. No other adjustments are necessary.

g. The consolidation adjustment would eliminate the internal profit $4,000; $3,500 against the carrying amount of the plant. No other adjustments are necessary.