Consolidation adjustment in respect of transfer of machinery

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Reference no: EM131257618

Alpha has owned 100% of the share capital of Beta for many years. On 21 October 20x2, Alpha transferred a machine, purchased in June 20x0 for €100,000 to Beta for € 95,000. Both companies charge a full years’ s depreciation on all machinery owned at the end of each financial year, at a rate of 10% straight line. Neither company charges depreciation in the year of disposal. The balance sheet of each company at 31 March 20x3 included fixed assets at the following net amounts respectively:

Alpha € 1,565,000

Beta € 872,000

Consolidation adjustments in respect of the transfer of machinery, required in preparing the consolidated statements for the year ended 31 March 20x3 will:

a) Increase profit by €14,500

b) Increase profit by €15,500

c) Reduce profit by €14,500

d) Reduce profit by €15,500

Reference no: EM131257618

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