Addison owns all of the share capital of Erin. The following intragroup transactions, all parts of which are independent unless specified, took place.
1. In January 2013, Addison sold inventory to Erin for $15,000. This inventory had previously cost Addison $10,000, and it remained unsold by Erin at the end of the period.
2. All the inventory in (1) above was sold to Olivia, an external party, for $20,000 on February 2, 2013.
3. Half the inventory in (1) above was sold to Taylah, an external party, for $9,000 on February 22, 2013. The remainder was still unsold at the end of the period.
4. Addison, in March 2013, sold inventory for $10,000 that was transferred from Erin three years ago. It had originally cost Erin $6,000, and was sold to Addison for $12,000.
5. Erin sold some land to Addison in December 2012. The land had originally cost Erin $25,000, but was sold to Addison for only $20,000. To help Addison pay for the land, Erin gave Addison a loan of $12,000, and the balance was paid in cash. Addison has as yet made no repayments on the loan.
6. On January 1, 2013, Addison sold a depreciable asset costing $10,000 to Erin for $12,000. Addison had not charged any depreciation on the asset before the sale. Both entities depreciated assets at 10% p.a. on cost.
7. On January 1, 2012, Addison sold a machine to Erin for $6,000. This item had cost Addison$4,000. Both companies charged depreciation at the rate of 10% p.a. on cost.
Prepare the consolidated financial statement adjustments as at December 31, 2013. Assume an income tax rate of 40% and that all income on sale of assets is taxable and expenses are deductible.

  • CreatedJune 09, 2015
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