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