Hi teacher,

This is the solution to a question(I have the solution but I do not know why that is the case), however, I still do not understand, so please answer the questions I asked following, instead of the question in the picture, and please give me a detailed explanation, then I'll thumb you up. Thanks

My questions:

1. Could you please provide a very detailed journal entry for this question?

2. I choose E for this question because I think the unrealized profit should be adjusted, so I use (15000/1.2)=12500, 15000-12500=2500. So we should adjust the unrealized profit for 2500, why E is wrong?

Question 1 0/ 1 pts The closing inventory balance recognised in Tile Ltd's financial statements for the year ended 30 June 20x7 included $15,000 of goods purchased from its subsidiary, Floor Ltd. All entities in the Tile Ltd Group use the perpetual inventory system, have adopted an intragroup inventory transfer policy of cost plus 20% and recognise inventory movements on a FIFO basis. The company tax rate is 30% for all accounting periods. The consolidation adjusting journal entries for the year ended 30 June 20x7 would include: a) Cr Sales Revenue $15,000 b) Cr Cost of Good Sold $12,500 c) Cr Inventory $15,000 Correct Answer d) Dr Deferred Tax Asset $750 You Answered e) Dr Sales Revenue $2,500 Student Resources: Arthur et al. section 4.4.3