Harry Ltd gained control of Potter Ltd on 30 June 2018. Harry applies the diminishing balance depreciation method to equipment at a rate of 40%, and requires this policy to be applied in the consolidation. Potter, however, has applied the straight-line depreciation method to its equipment. Potter's equipment was purchased on 1 July 2018 and cost $13,000. At purchase, expectations were that the equipment has a useful life of 5 years and a residual value of $1,000. On 30 June 2020, the consolidation adjustment will include the following line:

1. Dr Retained profits (SOP) $720
2. Dr Retained profits (SOP) $3,520
3. Dr Accumulated depreciation $3,520
4. Dr Depreciation expense $720

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