On 30 June 2019, Aarfy Ltd entered into a 5 year finance lease for the right to
Question:
On 30 June 2019, Aarfy Ltd entered into a 5 year finance lease for the right to use equipment. The fair value of the equipment at that inception of the lease is $1 200 000. Lease payments are made in advance on 30 June each year. An extract of the lease repayments schedule is as follows:
AARFY LTD Extract of Lease Payments Schedule Minimum lease payments Interest expense Reduction in liability Balance of liability
| minimum lease payment | intrest expenses | reduction of lability | balance of labiality | |
| 30 June 2019 | 1143131 | |||
| 30 June 2019 | 160000 | 160000 | 983131 | |
| 30 June 2020 | 160000 | 98313 | 61687 | 921444 |
| 30 June 2021 | 160000 | 92144 | 67856 | 853588 |
Required: Based on the lease repayment schedule, prepare the journal entries of the Aarfy Ltd to account for the finance lease from 30 June 2019 to 30 June 2020 (narrations are not required). (9 marks)
3.2 Curly Ltd bought 100% of issued shares in Moe Ltd on 1 July 2020. The following transactions occurred between Curly and Moe during the year ended 30 June 2021: -
During the year-ending 30 June 2021, Moe sold inventory to Curly for $80,000. This inventory had cost Moe $74,000. By the end of the year ending 30 June 2021, Curly had sold one-third of the inventory to Pixel Ltd for $72,000 and the remaining two-thirds of the inventory was still held by Curly
. - Assume the corporate tax rate is 30%
Required: For the purposes of consolidated financial statements, discuss the reason as to the need for the adjustment journal entries, for the above intra-group transactions, between the two entities and prepare the consolidation journal entries for the above transaction for the year ending 30 June 2021.
