City Ltd sold an item of machinery to its subsidiary West Ltd on 1 April 2018 for $100 000. The asset had cost City Ltd $80 000 when acquired on 1 April 2017. At that time the remaining useful life of the machinery was assessed at 6 years. The adjustment necessary on consolidation as at 30 June 2020 in relation to the sale of Machinery will result in:

Select one:

a decrease in retained earnings and a decrease in current year profit

A decrease in retained earnings and an increase in current year profit

an increase in retained earnings and an increase in current year profit

an increase in retained earnings and a decrease in current year profit

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A consolidation worksheet adjustment to eliminate the effect of interest revenue and interest expense relating to intragroup loans has which of the following tax effects?

Select one:

Increase in deferred tax liability

Increase in current tax liability

No tax effect

Decrease in deferred tax asset