Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following? a.Gain on saleDr10 000 PlantCr 10 000 Deferred tax assetDr3 000 Income tax expenseCr 3 000 Accumulated depreciationDr1 250 Depreciation expenseCr 1 250 Income tax expenseDr375 Deferred tax assetCr 375 b.Accumulated depreciationDr10 000 Gain on saleDr10 000 PlantCr 20 000 Deferred tax assetDr3 000 Income tax expenseCr 3 000 Accumulated depreciationDr1 250 Depreciation expenseCr 1 250 Income tax expenseDr375 Deferred tax assetCr 375 c.PlantDr10 000 Gain on saleDr5 000 Accumulated depreciationCr 15 000 Deferred tax assetDr1 500 Income tax expenseCr 1 500 Accumulated depreciationDr1 250 Depreciation expenseCr 1 250 Income tax expenseDr375 Deferred tax assetCr 375 d.Accumulated depreciationDr15 000 Gain on saleDr5 000 PlantCr 20 000 Deferred tax assetDr1 500 Income tax expenseCr 1 500 Accumulated depreciationDr1 250 Depreciation expenseCr 1 250 Income tax expenseDr375 Deferred tax assetCr 375

Cost of Equipment $ 60,000 Useful Life in years 6 Annual Depreciation $…

Answered: nuary 2015. At that time the useful…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.6E

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Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following?

a.	Gain on sale	Dr	10 000
	Plant	Cr		10 000
	Deferred tax asset	Dr	3 000
	Income tax expense	Cr		3 000
	Accumulated depreciation	Dr	1 250
	Depreciation expense	Cr		1 250
	Income tax expense	Dr	375
	Deferred tax asset	Cr		375


b.	Accumulated depreciation	Dr	10 000
	Gain on sale	Dr	10 000
	Plant	Cr		20 000
	Deferred tax asset	Dr	3 000
	Income tax expense	Cr		3 000
	Accumulated depreciation	Dr	1 250
	Depreciation expense	Cr		1 250
	Income tax expense	Dr	375
	Deferred tax asset	Cr		375

c.	Plant	Dr	10 000
	Gain on sale	Dr	5 000
	Accumulated depreciation	Cr		15 000
	Deferred tax asset	Dr	1 500
	Income tax expense	Cr		1 500
	Accumulated depreciation	Dr	1 250
	Depreciation expense	Cr		1 250
	Income tax expense	Dr	375
	Deferred tax asset	Cr		375

d.	Accumulated depreciation	Dr	15 000
	Gain on sale	Dr	5 000
	Plant	Cr		20 000
	Deferred tax asset	Dr	1 500
	Income tax expense	Cr		1 500
	Accumulated depreciation	Dr	1 250
	Depreciation expense	Cr		1 250
	Income tax expense	Dr	375
	Deferred tax asset	Cr		375

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