A parent entity sold inventories to its subsidiary in year 1 at a before-tax profit of $5000. At balance sheet date, the subsidiary had not sold the inventories to an external party. The company tax rate is 30%. The year 1 consolidation worksheet will contain which of the following adjustment entries for inventories?

Select one:

Dr Inventories $3 500

Cr Inventories $5 000

Cr Inventories $3 500

Dr Inventories $5 000