Parent Ltd owns 80% of Subsidiary Ltd. In the financial year ended 30 June 20X2, Subsidiary...

 

 

Transcribed Image Text:

Parent Ltd owns 80% of Subsidiary Ltd. In the financial year ended 30 June 20X2, Subsidiary Ltd sold inventory to Parent Ltd. Details regarding the transaction are as follows: Cost to Subsidiary to produce inventory $9000 Sale price of inventory to Parent Ltd. $12000 Percentage of inventory still held by Parent Ltd at 30 June 20X2 30% Percentage of inventory still held by Parent Ltd at 30 June 20X3 0% Tax rate 30% (i) Prepare any necessary journal entries in the consolidation journal to eliminate this transaction for the year ended 30 June 20X2. Dr Cost of goods sold (Eliminate the intra-group revenue/expense on the sale before tax) Dr Cr (Adjust for tax effects of elimination of intra-group transaction) (ii) Prepare any necessary journal entries in the consolidation journal to eliminate this transaction for the year ended 30 June 20X3. Dr Income tax expense Cr (Eliminate impact of prior year's intra-group transaction) (iii) Prepare any necessary journal entries in the consolidation journal to adjust the Non- Controlling Interests (NCI) allocation for the year ended 30 June 20X3. Dr Cr |(NCI adjustment resulting from elimination of prior year's intra-group transaction) Dr Cr |(NCI adjustment resulting from current year's effects of intra-group transaction) Parent Ltd owns 80% of Subsidiary Ltd. In the financial year ended 30 June 20X2, Subsidiary Ltd sold inventory to Parent Ltd. Details regarding the transaction are as follows: Cost to Subsidiary to produce inventory $9000 Sale price of inventory to Parent Ltd. $12000 Percentage of inventory still held by Parent Ltd at 30 June 20X2 30% Percentage of inventory still held by Parent Ltd at 30 June 20X3 0% Tax rate 30% (i) Prepare any necessary journal entries in the consolidation journal to eliminate this transaction for the year ended 30 June 20X2. Dr Cost of goods sold (Eliminate the intra-group revenue/expense on the sale before tax) Dr Cr (Adjust for tax effects of elimination of intra-group transaction) (ii) Prepare any necessary journal entries in the consolidation journal to eliminate this transaction for the year ended 30 June 20X3. Dr Income tax expense Cr (Eliminate impact of prior year's intra-group transaction) (iii) Prepare any necessary journal entries in the consolidation journal to adjust the Non- Controlling Interests (NCI) allocation for the year ended 30 June 20X3. Dr Cr |(NCI adjustment resulting from elimination of prior year's intra-group transaction) Dr Cr |(NCI adjustment resulting from current year's effects of intra-group transaction)