Question 26 0.5 pts Labrador Ltd sold inventories (with a cost to produce of $85 000) to its parent company, Golden Ltd for $145 000. One third of the inventories were sold to Sulky Ltd before the financial year end. Tax rate was 30% Which of the following statements is correct with respect to this transaction? Consolidated profit will increase by $42 000. Consolidated profit will decrease by $42 000, Consolidated profit will decrease by $40 000. Consolidated profit will decrease by $28 000. Question 25 0.5 pts Ekezial Limited owns 70 per cent of the issued capital of Bonding Limited and Ekezial Limited owns 55 per cent of the issued capital of Toast Company. The three companies form an economic entity for the purposes of consolidated accounts. During the period Bonding Limited sold inventories to Toast Company for $300 000. It cost Bonding Limited $200 000 to produce. Toast Company sold the same inventories to Ekezial Limited for $500 000 and Ekezial Limited sold it to Lasting Limited for $600 000. What is the sales revenue reported in the consolidated statements for this item? $600 000 $1 400 000 $1 100 000 $1 000 000 Question 21 0.5 pts Luke Limited acquired a 33% interest in Warm Ltd for $75 000 and Luke Limited has a number of subsidiaries. In the financial period immediately following the date on which it became an associate, Warm Ltd generated profits after tax of $50 000 and declared dividends of $8 000. If equity accounting is to be applied, the balance in the investor's account 'Investment in Associate' would be: $13 860 $88 860 $94 140 $19 140 D Question 23 0.5 pts The treatment of dividends, paid by a subsidiary, that are identified as paid out of pre- acquisition profits in the period they are paid, is carried out to: record a return of the investment in the subsidiary by decreasing the investment in the subsidiary in the books of the parent entity. The amount of the investment will be eliminated on consolidation record a decrease in pre-acquisition reserves or retained profits in the books of the subsidiary capitalise the dividend in the books of the parent entity as a further investment in the subsidiary. This amount will be eliminated on consolidation record dividend revenue and the receipt of cash in the books of the parent entity