Prepare adjusting journal entryfor consolidation worksheet

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Reference no: EM132911192

Melbourne Ltd owns 100% the share capital of Portland Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 2020 or 30 June 2021.

(a) On 1 May 2020, Melbourne Ltd sold inventories to Portland Ltd for $5 000 in cash, recording a profit of $1000. On 15 June 2020, Portland Ltd sold half of those inventories to an external entity for $3 000. Therefore, half of the inventories were unsold by Portland Ltd at 30 June 2020. On 31 January 2021, Portland Ltd sold the remaining inventories to an external entity for $3 000. Therefore, none of these inventories were on hand at 30 June 2021.

(b) On 1 January 2021, Portland Ltd sold inventories costing $5000 to Melbourne Ltd at a transfer price of $8000, paid in cash. The entire inventories were sold by Melbourne Ltd to external entities by 30 June 2021.

Required

Problem 1: In relation to the above intragroup transactions prepare adjusting journal entries for the consolidation worksheet at 30 June 2020 and 30 June 2021 (narrations are required).

Reference no: EM132911192

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