Zorro Ltd acquired all the issued shares of Zen Ltd on 1 January 2019. The following...
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Zorro Ltd acquired all the issued shares of Zen Ltd on 1 January 2019. The following intra-group transactions have taken place between the two entities since this acquisition: Assume an income tax rate of 30%. a. On 18 June 2019, Zorro Ltd sold inventory to Zen Ltd for $85,000, recording a before-tax profit of $3,000. By 30 June 2019, Zen Ltd has sold one-third of these to external entities for $96,000. All inventory has been sold to external parties by 30 June 2020. (6 marks) b. On 31 May 2020, Zen Ltd sold a machine costing $150 000 to Zorro Ltd for $128 000. Zen Ltd had recorded accumulated depreciation of $25,000 (machine) before the sale. Both entities depreciate assets at 10% p.a. on cost. (11 marks) c. Zorro Ltd provided a loan to Zen Ltd for $240,000 on 1 August 2019. Interest is charged at 6% and paid on 30 September and 31 March each year. (10 marks) Required: Prepare the consolidation worksheet entries at 30 June 2020 to adjust for the effects of the above inter-entity transactions (Narrations are not required). For the toolbar, press ALT+F10 (PC) or ALT-FN-F10 (Mac) Zorro Ltd acquired all the issued shares of Zen Ltd on 1 January 2019. The following intra-group transactions have taken place between the two entities since this acquisition: Assume an income tax rate of 30%. a. On 18 June 2019, Zorro Ltd sold inventory to Zen Ltd for $85,000, recording a before-tax profit of $3,000. By 30 June 2019, Zen Ltd has sold one-third of these to external entities for $96,000. All inventory has been sold to external parties by 30 June 2020. (6 marks) b. On 31 May 2020, Zen Ltd sold a machine costing $150 000 to Zorro Ltd for $128 000. Zen Ltd had recorded accumulated depreciation of $25,000 (machine) before the sale. Both entities depreciate assets at 10% p.a. on cost. (11 marks) c. Zorro Ltd provided a loan to Zen Ltd for $240,000 on 1 August 2019. Interest is charged at 6% and paid on 30 September and 31 March each year. (10 marks) Required: Prepare the consolidation worksheet entries at 30 June 2020 to adjust for the effects of the above inter-entity transactions (Narrations are not required). For the toolbar, press ALT+F10 (PC) or ALT-FN-F10 (Mac)
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