Sam Ltd owns all the share capital of Ruth Ltd. The income tax rate is 30%. The
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Question:
Sam Ltd owns all the share capital of Ruth Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 2021 or 30 June 2022.
- Ruth Ltd manufactures items of machinery which are used as property, plant and equipment by other companies, including Sam Ltd. Ruth Ltd sold such an item to Sam Ltd for $70 000 on 1 January 2021, its cost to Ruth Ltd being only $63 000 to manufacture. Sam Ltd charges depreciation on these machines at 15% p.a. on the diminishing value.
- Sam Ltd sold a delivery truck to Ruth Ltd for $20 000 on 1 July 2020. The delivery truck had a carrying amount to Sam Ltd of $16 000. Both entities depreciate vehicles at a rate of 12% p.a. on cost.
- Sam Ltd manufactures items of inventories which it then markets through Ruth Ltd. Sam Ltd sold for $15 000 items of inventory to Ruth Ltd at cost plus 20% during the period ended 30 June 2022. Ruth Ltd has sold to external entities two third of these transferred inventory items by 30 June 2022.
- Ruth Ltd rented a spare warehouse from Sam Ltd for $65 000 p.a. The rental contract started at 1 January 2021 and ends on 31 December 2022. The payments are made annually in advance on 1 January.
Required
In relation to the above intragroup transactions:
Prepare adjusting journal entries for the consolidation worksheet on 30 June 2021 and 30 June 2022.
Posted Date: