(a) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for $8000. The 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 Inventory

Deferred Tax Asset

Cr Cr

Dr

13 000

2 000

300

Required

Income Tax Expense Cr

300

(i) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entry.

(ii)Determine the consolidation worksheet entries in the following year, assuming the inventory has been -sold, and explain the adjustments on a line-by-line basis.

(b) On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its' carrying value in Liala Ltd book