(a) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for $8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate consolidation adjustment entries are as follows: Sales Dr. 15000 Cost of Sales Cr.13000 Inventory Cr. 2000 Deferred Tax asset Dr.300 Income Tax Expenses Cr.300 Required (i) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entry. (ii) Determine the consolidation worksheet entries in the following year, assuming the inventory has been –sold, and explain the adjustments on a line-by-line basis.

(a) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for $8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate consolidation adjustment entries are as follows: Sales Dr. 15000 Cost of Sales Cr.13000 Inventory Cr. 2000 Deferred Tax asset Dr.300 Income Tax Expenses Cr.300 Required (i) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entry. (ii) Determine the consolidation worksheet entries in the following year, assuming the inventory has been –sold, and explain the adjustments on a line-by-line basis.

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter8: Consolidated Tax Returns

Section: Chapter Questions

Problem 37P

See similar textbooks

Similar questions

Subject: Corporate Accounting Q) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for $8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate consolidation adjustment entries are as follows: (i) Sales.....Dr 15,000 Cost of Sales...Cr 13,000 Inventory..........Cr 2,000 (ii) Deferred Tax Asset...Dr 300 Income Tax Expense...Cr 300Required(i) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entry. (ii) Determine the consolidation worksheet entries in the following year, assuming the inventory has been –sold, and explain the adjustments on a line-by-line basis.
Question 5 During 2021 Carla Vista Company purchased 9500 shares of Metlock Inc. for $25 per share. During the year Carla Vista Company sold 2250 shares of Metlock, Inc. for $30 per share. At December 31, 2021 the market price of Metlock, Inc.’s stock was $23 per share. What is the total amount of gain/(loss) that Carla Vista Company will report in its income statement for the year ended December 31, 2021 related to its investment in Metlock, Inc. stock? $-7750 $11250 $-19000 $-3250
C4) Helta Ltd acquired 100% of the share capital of Buzz Ltd on 1 January 2021. On that date, Helta Ltd began implementing a major change in the nature of Buzz Ltd’s trade. The trading profits/(losses) of each company for the two years ended 31 March 2021 are: Buzz Ltd Helta Ltd ££ Year ended 31 March 2020 80,000 20,000 Year ended 31 March 2021 100,00 20,000 The profits and losses are generated evenly throughout these periods. Neither company has any other income or gains, nor any other associated companies. Required: State, with supporting calculations, how relief is obtained for Buzz Ltd’s loss of £100,000, on the basis that the companies claim relief for losses as soon as possible.
Chapter 7/Question 2: Ulysses Co owns 25% of Grant Co, which it purchased on 1 May 20X8 for $5 million. At that date Grant Co had retained earnings of $7.4 million. At the year-end date of 31 October 20X8 Grant Co had retained earnings of $8.5 million after paying out a dividend of $1 million. On 30 September 20X8 Ulysses Co sold $600,000 of goods to Grant Co, on which it made 30% profit. Grant Co had not resold these goods by 31 October. At what amount will Ulysses Co record its investment in Grant Co in its consolidated statement of financial position at 31 October 20X8
E 5-6 Upstream and downstream sales Pam Corporation owns 70 percent of Sun Company’s common stock, acquired January 1, 2017. Patents from the investment are being amortized at a rate of $20,000 per year. Sun regularly sells merchandise to Pam at 150 percent of Sun’s cost. Pam’s December 31, 2017, and 2018 inventories include goods purchased intercompany of $112,500 and $33,000, respectively. The separate incomes (do not include investment income) of Pam and Sun for 2018 are summarized as follows: Pam Sun Sales $1,200,000 $800,000 Cost of sales (600,000) (500,000) Other expenses (400,000) (100,000) Separate incomes $ 200,000 $200,000 Total consolidated income should be allocated to controlling and noncontrolling interest shares in the amounts of: $344,550 and $61,950, respectively $358,550 and $60,000, respectively $346,500 and $60,000, respectively…
4. Enron Company decided on August 1, 2011 to dispose of a component of its business. The component was sold on November 30, 2011. Enron's income for 2011 included income of P5,000,000 from operating the discontinued segment from January 1 to the sale date. Enron incurred a loss on the November 30 sale of P4,500,000. Ignoring income tax, what amount should be reported in the 2011 income statement as income or loss under "discontinued operation"? a. 4,500,000 loss b. 5,000,000 income c. 500,000 loss d. 500,000 income
Q2 Maenetja Limited acquired 1000 shares in Manana Limited on 1 December 2014 at the fair value of R15 per share. Transaction costs amounted to R200. At the date of acquisition the company elected to recognize subsequent changes in the fair value of this investment in other comprehensive income (OCI). The company’s policy is to release any gains or losses resulting from these fair value adjustments to retained earnings when the shares are sold. On 31 December 2014 the market value of Manana Limited’s shares was R18. On 30 June 2015, 200 shares were sold for R19.50. The market value of the shares at 31 December 2015 was R14. What are the correct journal entries that should be recorded initially when the shares purchased on 1 December 2014? Select one: a. DR Investment R15 000DR Transaction costs R200 CR Bank/Liability R15 200 b. DR Investment R15 000…
Problem 7-4 (IFRS) r On September 30, 2021, when the carrying amount of the assets of a major subsidiary was P70,000,000, Young Company signed a legally binding contract to sell the subsidiary. The sale is expected to be completed by January 31, 2022 at a selling price of P60,000,000. In addition, prior to January 31, 2022, the sale contract obliged the entity to terminate the employment of certain employees of the business segment incurring an expected termination cost of P5,000,000 to be paid on June 30, 2022. The segment's revenue and expenses for 2021 were P40,000,000 and P45,000,000 respectively. The income tax rate is 30%. What amount should be reported as loss from discontinued operation for 2021? a. 10,500,000 b. 20,000,000 c. 15,000,000 d. 14,000,000
PROBLEM 35At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15,000,000 when the net assets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount.b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018…
Question:The following is the extract from trial balance of G Limited, subsidiary of Y Limited for the year ended 31 December 2021. Dr CrInventory on hand: 31/12/2020 50 000 Sales 1025000Purchases 350 000 Depreciation 25 000 Rent income 40 000Dividend paid 11 000 Other expenses 300 000 Income tax expense 145 000 Additional information: 1. Y Limited acquired its interest in G limited on the 1 st May 2021. 2.The average monthly sales of G Limited accrued evenly throughout the year.…
P 4-5 Workpapers in year of acquisition (excess recorded for inventory, building, equipment, trademarks, and goodwill) Pam Corporation acquired a 70 percent interest in Sun Corporation’s outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders’ equity (book value) of Sun on this date consisted of $1,000,000 capital stock and $200,000 retained earnings. The differences between the fair value of Sun and the book value of Sun were assigned $10,000 to Sun’s undervalued inventory, $28,000 to undervalued buildings, $42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalued inventory items were sold during 2016, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The trademarks have a 40-year life. Depreciation is straight line. At December 31, 2016, Sun’s accounts payable include $20,000 owed to Pam. This $20,000 account…
Q2. Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. During the 2020–21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: A).Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers. B).Compute the cost of goods sold to be reported in the consolidated income statement for 2021 relating to this intra-group sale.