Reference no: EM132836660
Question - Parent Ltd owns all of the shares of Subsidiary Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2020. Assume an income tax rate of 30%..
Part A - On 1 June 2020, Parent Ltd sold inventory costing $50?000 to Subsidiary Ltd for $88?000. 40% of this inventory was sold to external entities for $70?000 before 30 June 2020.
Part B - On 1 January 2019, Parent Ltd sold an item of inventory costing $25 000 to Subsidiary Ltd for $35 000. Subsidiary Ltd treated this item as part of its equipment and depreciated it at 5% p.a. on a straight-line basis.
Part C - During June 2019, Subsidiary Ltd sold the land to Parent Ltd making a profit of $50?000. The land is still held by Parent Ltd.
Part D - On 1 July 2019, Parent Ltd sold an item of machinery costing $60 000 to Subsidiary Ltd for $90 000. Subsidiary Ltd treated this item as part of its merchandised inventory and sold all inventory by 30 June 2020. Parent Ltd depreciated all machinery it at 10% p.a. on a straight-line basis.
Part E - On 1 January 2020, Parent Ltd acquired $200?000 of debentures previously issued by Subsidiary Ltd. These were acquired on the open market for $190 000. The Half-yearly Interest of $36,000 on debentures was paid on 30 June 2020.
Part F - On 1 July 2018, Subsidiary Ltd rented a spare warehouse to be used by Parent Ltd and Butterfly Ltd. Parent Ltd agreed to pay 70% of the rent and Butterfly Ltd will pay remaining 30% to Subsidiary Ltd. Total rent charged (and received) for the warehouse for the year ending 30 June 2019 and 30 June 2020 were 100,000 and $120 000 respectively.
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