Intercompany transaction eliminations

Assignment Help Accounting Basics

Reference no: EM133064762

Question: Eliminations for substitution and for select intercompany transactions of the current and prior periods.

Nixon Ltd acquired all the shares in Kissinger Ltd on 20 October 20X1 for $8 200 000 cash. At that date, Kissinger owners' equity comprised:

$
Paid-up capital 6 300 000
Asset revaluation reserve 400 000
Other reserves 800 000
Retained profits 500 000
8 000 000

The following events occurred in 20X2 and 20X3:
- In 20X2 Kissinger paid a 5 per cent (of capital) dividend from current profit. There were no dividends in 20X3.
- In 20X3, inventory which cost $40 000 was sold by Kissinger to Nixon for $60 000. At the year end, $26 000 of this inventory remained on hand.
- Nixon sold a second-hand vehicle to Kissinger on 10 January 20X3 for $40 000. This vehicle had been fully depreciated by the sale date. Kissinger charged $10 000 depreciation on this vehicle in 20X3.
- In 20X2, goodwill impairment was assessed at $15 000.

Required:
Prepare consolidation journal entries necessary at 31 December 20X3 to deal with the above events and information.

- Do substitution elimination entry first

- Then do intercompany transaction eliminations

Reference no: EM133064762

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