Prepare the consolidation adjusting journal entries for year

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Shark Ltd is the parent entity to the wholly owned subsidiaries of Dolphin Ltd, Fish Ltd, and Guppy Ltd. On 1 July 2020 Shark Ltd sold a submarine to Guppy Ltd for $480,000 cash. The original cost of the submarine was $600,000. Shark Ltd adopted an accounting policy whereby submarine was being depreciated on a straight line basis over its useful life of 6 years. The carrying amount of the submarine in Shark Ltd's financial statements at the date of sale was $400,000. Subsequent to the transfer, Guppy Ltd depreciated the submarine on a straight line basis over its remaining useful life of 4 years.

Required:

Problem a) Prepare the consolidation adjusting journal entries for the year ended 30 June 2021 for the Shark Ltd group.

Problem b) Explain why the adjustment for this transaction is necessary.

Reference no: EM132997852

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