Piros Ltd. sold inventory to its wholly owned subsidiary, Stanimir, for $15,000. These items previously cost Piros $12,000. Stanimir subsequently sold half the items to Nova for $8,000. The tax rate is 30%.
The group accountant for Piros, Li Chen, maintains that the appropriate consolidation adjustments are as follows:

Required
(a) Discuss whether the adjustments suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustments.
(b) Determine the consolidated financial statement adjustments in the following year, assuming the inventory is sold, and explain the adjustments on a line-by-line basis.

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Sales Cost of sales Deferred tax asset ↑ 2,000 Income tax expense300 15,000 13,500