Reference no: EM132613864
Thor Ltd and Loki Ltd have the following intragroup inventory transactions:
For the financial year ending 30 June 2019:Loki Ltd sold inventory to Thor Ltd for a price of $60,000. The inventory cost Loki Ltd $20 000 to produce. At 30 June 2019, Thor Ltd still had 40% of this inventory on hand, but by 30 June 2020, all of this inventory had been sold to external parties.
For the financial year ending 30 June 2020:Thor Ltd sold inventory to Loki Ltd for a price of $120,000. The inventory cost Thor Ltd $80 000 to produce. By 30 June 2020, Loki Ltd had sold 75% of this inventory to external parties.
Question 1: Assuming a tax rate of 30 per cent, prepare consolidation/elimination journals related to these intra group inventory transactions only for the year ending 30 June 2020.
Question 2: I. Explain where the journals prepared above in parts (b) and (c) are processed and clearly identify why this is the case.
II. AASB 3 provides preparers of financial statements with a choice in the measurement of the non- controlling interest. Which method would Thor Ltd apply when measuring its non-controlling interest in Loki Ltd if it wished to understate the total assets of the economic entity? Why?
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