During the financial year ended 30 June 2004, M Bhd (MB) which has a 40% ownership...

 

Transcribed Image Text:

During the financial year ended 30 June 2004, M Bhd (MB) which has a 40% ownership interest in its associate N Bhd (NB) purchased merchandize from the associate amounting to RM1,500, 000. At the end of the financial year, MB still had RM400, 000 of the merchandize purchased from NB in its ending inventory. This had cost NB RM250, 000. You are required to: a). Prepare the journal entry to eliminate the unrealized gain or loss in the records of MB without the tax effect. b). Prepare the elimination journal entry with tax effect. Assume income tax rate is at 25%. c). In different scenario, we will assume that NB purchased merchandize from MB. At the end of the financial year, NB still had RM500, 000 of the merchandize purchased from MB in its ending inventory. This had cost MB RM400, 000. Ignore tax effect accounting. During the financial year ended 30 June 2004, M Bhd (MB) which has a 40% ownership interest in its associate N Bhd (NB) purchased merchandize from the associate amounting to RM1,500, 000. At the end of the financial year, MB still had RM400, 000 of the merchandize purchased from NB in its ending inventory. This had cost NB RM250, 000. You are required to: a). Prepare the journal entry to eliminate the unrealized gain or loss in the records of MB without the tax effect. b). Prepare the elimination journal entry with tax effect. Assume income tax rate is at 25%. c). In different scenario, we will assume that NB purchased merchandize from MB. At the end of the financial year, NB still had RM500, 000 of the merchandize purchased from MB in its ending inventory. This had cost MB RM400, 000. Ignore tax effect accounting.

Answer rating: 100% (QA)

a Journal Entry to Eliminate Unrealized Gain or Loss No Tax Effect When preparing the journal entry ... View the full answer