The following transactions occurred between Jimmy Ltd and its wholly-owned subsidiary, Paul Ltd. All transactions occurred during the year ended 30 June 2020 unless specifically stated otherwise. The company tax rate is 30%.

Required:

Prepare the adjustment journal entries required to eliminate the intra-group transactions in the consolidation worksheet of Jimmy Ltd Group at 30 June 2020.

1. Three years ago, Jimmy Ltd sold machinery to Paul Ltd for $80,000 on 30 June 2017. At the time of the sale, the machinery was recorded by Jimmy Ltd as inventory at a book value of $30,000. After the sale, Paul Ltd depreciates the machinery on a straight-line basis over a useful life of 10 years with a residual value of zero.

2. Paul Ltd sold inventory to Jimmy Ltd for $10,000. The inventory originally cost Jimmy Ltd $20,000. By the end of the year, all of the inventory had been sold to an external party.

3. Jimmy Ltd sold inventory to Paul Ltd for $30,000. The inventory originally cost Jimmy Ltd $24,000. By the end of the year, one-third the inventory had been sold to an external party, and the other two-thirds of the inventory remained on hand.

4. Paul Ltd sold inventory to Jimmy Ltd for $50,000 during the previous financial year on 2 February 2019. The original cost of the inventory to Paul Ltd was $30,000. All of the inventory remained on hand on 30 June 2019. Three quarters (75%) of the inventory was sold to an external party during the year ended 30 June 2020, and the remaining one quarter (25%) of the inventory was still on hand by the end of the year.

Answer rating: 100% (QA)

Answer Adjustment Journal Enteries for Jimmy Ltd Group Dr Sr No Particular Cr 1 For Machinery By Con... View the full answer