Reference no: EM133553879

Question: (ABC) acquired 100% of the 300,000 issued shares in (XYZ) on 1 July 2021. There where some Intragroup Transactions during the year ended 30 June 2022. What are the journal entries and other considersations for the following transations?

A) During the year ABC lent XYZ $400,000. The loan is on an interest only basis with interest paid on 30 June each year for the five year term. XYZ used the funds to partially fund the purchase of vacant land on which it built industrial premises. XYZ's operations are now run from these premises. XYZ did not own any land or buildings prior to the acquisition date. The balance of the cost of land and construction were drawn from XYZ's cash account.

B) XYZ records interest paid on the loan from ABC as Finance Expenses. These were the only finance expenses incurred by ABC during the year.

C) During the year, XYZ paid an interim dividend of $8000. The company has declared a further dividend at the end of the 2022 financial year which will be paid in September 2022. ABC did not receive dividends from any other sources during the year.

D) 50% of the service revenue generated by XYZ is for maintenance services provided to ABC. $13,000 of this had not been paid at the end of June.

E) ABC provides HR and Payroll services to XYZ. They charge XYZ $2,000 a month for this service. A review of the accounts provided shows that XYZ had not raised an invoice for the services provided in June 2022 and the cost had not been accrued in the accounts of XYZ. ABC records the service fees in "Other Revenue", while XYZ records the cost in "Administration Expenses".

F) ABC sold equipment to XYZ on 31 December 2021 for $90,000. The equipment was originally purchased by ABC on 1 July 2020 for $102,000. It had an expected life of 6 years with zero residual value. At the date of sale the carrying value in ABCs books was $76,500. XYZ has recorded depreciation of $10,000 for the period based on the transfer value and the remaining useful life of 4.5 years using the straight line method.

G) Neither ABC nor XYZ had recorded income tax payable for the current year. The income tax payable for the year ended 30 June 2022 is $122,000 for ABC and $21,900 for XYZ.