Prepare the adjusting journal entries required

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Question - (a) On 1 May 2014, Parent Ltd commenced renting an office from its subsidiary at $1,000 per month. At 30 June 2014, Parent Ltd had prepaid one month of rent in advance. Prepare the adjusting journal entries required for the preparation of the consolidation worksheet at 30 June 2014.

(b) On 23 June 2014, Subsidiary Ltd sold inventory which cost $12,000 to Parent Ltd for $10,000. By 30 June 2014, Parent Ltd had sold a third of the inventory to external parties. The remainder was sold during July 2014. The tax rate is 30%.

(i) Prepare the adjusting journal entries relating to the information in part (b) only that are required for the preparation of the consolidation worksheet at 30 June 2014. Show all calculations.

(ii) Explain the rationale for each of your entries in (b)(i) above.

(iii) Prepare the adjusting journal entries relating to the information in part (b) only that are required for the preparation of the consolidation worksheet at 30 June 2015. Show all calculations.

Reference no: EM133064802

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