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L Ltd owns 100% equity of S Ltd. The following inter-entity transaction took place between...

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Accounting

L Ltd owns 100% equity of S Ltd. The following inter-entity transaction took place between L Ltd and S Ltd. During the period, S Ltd sells inventory to L Ltd at a sales price of $300 000. S Ltd marks up its inventory by 50%. At the end of the period, 25% of this inventory is still on hand with L Ltd. The tax rate is assumed to be 30%. What will be the CR to the inventory asset account in the consolidation adjustment journal? A) $25 000 B) $40 000 C) $28 000 D) None of the above

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