Reference no: EM132940851

Question - White Limited is the only shareholder of Brown Limited. Given below are independent intra-group transactions for the period ending 30th June, 2019.

1. During the year ending 30th June, 2019, Brown Limited sold inventory worth $50,000 to White Limited. Brown Limited made profit after tax of $8,000. At 30th June, 2019, White Limited has sold 45% of these goods to Tony and 20% to Sam.

2. White Limited sold a depot to Brown Limited for $150,000. This had originally cost White Limited $120,000. The transaction took place on 1st January, 2017. Brown Limited charges depreciation at 5% per annum on straight line basis.

3. On 1st June, 2018, Brown Limited sold inventory costing $15,000 at a mark-up of 40% to White Limited. By 30th June 2018, 30% of these inventories were sold to Jacob and the remaining 70% was sold on 2nd July, 2019 to Andrew.

4. On 1st January, 2018, White Limited sold inventory costing $10,000 to Brown Limited at a transfer price of $15,000. On 3rd September, 2018, Brown Limited sold half of these inventories back to White Limited, receiving $6,000 from White Limited. Of the remainder kept by Brown Limited, one-third was sold in March, 2019 to Simran at a profit of $5,000.

5. On 1st October, 2018, White Limited issued 1,000 10% debentures of $100 at nominal value. Brown Limited acquired 600 of these debentures. Interest is payable on 31st March and 30th September. Accruals are recognised in the legal entities' accounts.

6. On 1st May, 2018, Brown Limited sold inventory to White Limited for $10,000, recording a before tax profit of $3,000. Half of these inventories were sold by White Limited to John at 30th June, 2018.

7. On 1st July, 2018, Brown Limited sold a depreciable asset costing $10,000 to White Limited for $18,000. Brown Limited has not charged any depreciation on the asset before the sale. Both entities depreciate assets at 10% per annum.

Required - Prepare intra-group adjusting journal entries for the year ended 30th June, 2019 assuming an income tax rate of 20%. (show all the workings).