a subsidiary sold a depreciable asset (carrying amount of 19000) to the parent on 1 January 2019 for 31000. both entities charge depreciation in relation to these items at a rate of 15% p.a. on cost. On 31 December 2019, the parent sold this asset to ABC Ltd, an external entity, for 40000. Assume an income tax rate of 30%. Prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at June 2020.

The answer is:

Dr. Retained earnings 7770

Dr. Income tax expense 3330

Cr. depreciation expense 900

Cr. carrying amount

explain why