Prepare the consolidation journal entries for financial year

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Jones Ltd owns all the share capital of Johnson Ltd. The following transactions relate to the financial year ended 30 June 2020. The tax rate is 30%.

i) During the year ended 30 June 2020, Johnson Ltd sold $200,000 worth of inventory to Jones Ltd. Johnson Ltd recorded a $40,000 profit before tax on this transaction. Jones Ltd has one-quarter of the inventory still on hand at the end of the financial year.

ii) On 25 June 2020, Jones Ltd declared a dividend of $40,000. On the same day Johnson Ltd declared a $20,000 dividend.

iii) On 1 December 2019, Johnson leased surplus office space to Jones, at a rental payment of $18,000 per month. Rent is payable half-yearly in advance, on 1 December and 1 June each year.

Requirement:

Problem 1: Prepare the Consolidation Journal entries for the financial year ended 30 June 2020.

Reference no: EM132820949

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