Parent Ltd owns 80% of Subsidiary Ltd. In the financial year ended 30 June 20X2, Subsidiary Ltd sold inventory to

Question

Parent Ltd owns 80% of Subsidiary Ltd. In the financial year ended 30 June 20X2, Subsidiary Ltd sold inventory to Parent Ltd. Details regarding the transaction are as follows: Cost to Subsidiary to produce inventory $7000 Sale price of inventory to Parent Ltd. $11000 Percentage of inventory still held by Parent Ltd at 30 June 20X2 20% Percentage of inventory still held by Parent Ltd at 30 June 20X3 0% Tax rate 30% Round all your answers to the nearest dollar amount. If you believe no journal entry is required, select NULL for the account name, NA for the Dr or Cr, and enter 0 for the amount. Do not leave the amount blank. Do not enter dollar ($) signs or commas (i.e. enter 10000 not $10,000). Required: (i) Prepare any necessary journal entries in the consolidation journal to eliminate this transaction for the year ended 30 June 20X2. (ii) Prepare any necessary journal entries in the consolidation journal to eliminate this transaction for the year ended 30 June 20X3. (iii) Prepare any

Help In Homework · Accepted Answer

Journal Entries: Date Account Titles and Explanation Debit Credit 30/6/2002 Sales $11,000 Inventory ($11,000*20%) 2200 Cost of Goods Sold $8,800 (Being inter-company sales entry reversed and unrealised profit from inventory removed) 30/6/2002 Deferred Tax Assets ($4,000*20%*30%) 240 Income Tax Benefits 240 (Being DTA created on 30% of unrealised profits) 30/6/2003 No entry (Since profit has been realised, NCI will get allocation through PL) 30/6/2003 Income Tax Expenses 240 Deferred Tax Assets 240 (Being DTA reversed on realisation of profit)

Why Choose Us?

0% AI Guarantee

24/7 Support

Plagiarism Free

Expert Tutors

100% Confidential

On-Time Delivery

Parent Ltd owns 80% of Subsidiary Ltd

Expert Solution

Archived Solution

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
30/6/2002	Sales	$11,000
	Inventory ($11,000*20%)		2200
	Cost of Goods Sold		$8,800
	(Being inter-company sales entry reversed and unrealised profit from inventory removed)

30/6/2002	Deferred Tax Assets ($4,00020%30%)	240
	Income Tax Benefits		240
	(Being DTA created on 30% of unrealised profits)

30/6/2003	No entry
	(Since profit has been realised, NCI will get allocation through PL)


30/6/2003	Income Tax Expenses	240
	Deferred Tax Assets		240
	(Being DTA reversed on realisation of profit)