On 1 July 2020 S Ltd acquired 60% of the issued shares of P Ltd. During the year ended 30 June 2021 the following intra group transactions occurred:

1. a). Sales of inventory: P Ltd to S Ltd $200,000 (Cost to P Ltd $150,000)

2. b). Intragroup inventory on hand 30 June 2021: S Ltd held 40% of the inventory acquired from P Ltd

3. c). Intragroup sale of equipment An item of equipment originally acquired by S Ltd on 1 July 2018 at a cost of $200,000 was sold to P Ltd on 1 July 2020 for $170,000. S Ltd had depreciated this asset at 10% per annum on a straight line basis with no scrap value. Subsequent to the sale the expected useful life of the asset is a further 4 years.

4. During the year ended 30 June 2021 the following dividends were paid:

• S Ltd       $10,000
• P Ltd       $2,000

5. On 31 December 2020 S Ltd lent P Ltd $100,000. Interest on this loan at 6% was paid up to 30 June 2021.

6. During the year ended 30 June 2021 P Ltd paid S Ltd $4,000 for management services.

Required.

Prepare the consolidation journal entries required to eliminate the above intragroup transactions for the year ended 30 June 2021. Assume a tax rate of 30%

Answer rating: 100% (QA)

Sale of inventory Sales 80000 To cost of goods sold 60000 To inventory 2... View the full answer