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Prepare the journal entries required

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Question - On 1 July 2019, Canola Ltd acquired 100% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the financial year ending 30 June 2020.

(i) During the 2019 - 2010 financial year, Canola Ltd sold inventory to Palm Ltd for $1,000,000. Canola Ltd purchased this inventory at $700,000. By 30 June 2020, Palm Ltd has sold 70% of that inventory to an outside third party.

(ii) Palm Ltd sold a vehicle to Canola Ltd for $100000. The vehicle had been fully depreciated by Palm Ltd at 30 June 2020 and valued at $0 on Palm's books.

Required -

a) Prepare the journal entries required to eliminate the intra-group transactions above. Ignore any tax effects.

b) When are consolidated profits recorded for inventory transfers within the group?

Reference no: EM133019751

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