Required: Discuss the purpose of each entry and the reason why each account has been increased or decreased.

Assessment 2 question: Lilly Ltd is a public reporting entity and is required to prepare consolidated financial statements for the group. The company accountant has made the following adjusting entries in the worksheet for the year ended 30 June 2021 and each entry is independent. Corporate tax rate is 30%. Entry 1: (Suggested time: 1 minute) (3 marks) Date Account name Debit Credit ($) ($) 30/6/2021 Inventory 200,000 Proceeds on sale of Plant 180,000 Carrying amount of Plant sold 380,000 (6 marks) Entry 2: (Suggested time: 2 minutes) Date Account name 30/6/2021 Accumulated depreciation Debit ($) Credit ($) 75,000 Depreciation expense 50,000 Retained earnings (1/7/20) 25,000 30/6/2021 Income tax expense 15,000 Retained earnings (1/7/20) 7,500 Deferred tax asset 22,500 Entry 3: (Suggested time: 1 minute) (3 marks) Credit ($) Date Account name Debit ($) 30/6/2021 Retained earnings (1/7/20) 84,000 Income tax expense 36,000 Cost of Sales 120,000 Assessment 2 question: Lilly Ltd is a public reporting entity and is required to prepare consolidated financial statements for the group. The company accountant has made the following adjusting entries in the worksheet for the year ended 30 June 2021 and each entry is independent. Corporate tax rate is 30%. Entry 1: (Suggested time: 1 minute) (3 marks) Date Account name Debit Credit ($) ($) 30/6/2021 Inventory 200,000 Proceeds on sale of Plant 180,000 Carrying amount of Plant sold 380,000 (6 marks) Entry 2: (Suggested time: 2 minutes) Date Account name 30/6/2021 Accumulated depreciation Debit ($) Credit ($) 75,000 Depreciation expense 50,000 Retained earnings (1/7/20) 25,000 30/6/2021 Income tax expense 15,000 Retained earnings (1/7/20) 7,500 Deferred tax asset 22,500 Entry 3: (Suggested time: 1 minute) (3 marks) Credit ($) Date Account name Debit ($) 30/6/2021 Retained earnings (1/7/20) 84,000 Income tax expense 36,000 Cost of Sales 120,000