a) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions occurred between the two entities: • On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12,000, this inventory previously costed Liala Ltd $10,000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other entities for $3,000. The other 80% was all sold to external entities by 30 June 2017 for $13,000. During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6,000, this being at cost plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The tax rate is 30%. Required: (i) Prepare the consolidation worksheet entries for Liala Ltd at 30 June 2017 in relation to the intragroup transfers of inventory. I (ii) Compute the amount of cost of goods sold to be reported in the consolidated income statement for 2017 relating to the relevant intra-group sales. b) On 1 July 2016, Liala Itd sold an item of plant to Jordan Ltd Ltd for $150,000 when its carrying value in Liala Ltd book was $200,000 (costs $300,000, accumulated depreciation $100,000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Prepare the necessary journal entries in 30 June 2017 to eliminate the intra-group transfer of equipment.
a) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions occurred between the two entities: • On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12,000, this inventory previously costed Liala Ltd $10,000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other entities for $3,000. The other 80% was all sold to external entities by 30 June 2017 for $13,000. During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6,000, this being at cost plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The tax rate is 30%. Required: (i) Prepare the consolidation worksheet entries for Liala Ltd at 30 June 2017 in relation to the intragroup transfers of inventory. I (ii) Compute the amount of cost of goods sold to be reported in the consolidated income statement for 2017 relating to the relevant intra-group sales. b) On 1 July 2016, Liala Itd sold an item of plant to Jordan Ltd Ltd for $150,000 when its carrying value in Liala Ltd book was $200,000 (costs $300,000, accumulated depreciation $100,000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Prepare the necessary journal entries in 30 June 2017 to eliminate the intra-group transfer of equipment.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Transcribed Image Text:a) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions
occurred between the two entities:
• On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12,000, this inventory previously
costed Liala Ltd $10,000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other
entities for $3,000. The other 80% was all sold to external entities by 30 June 2017 for $13,000.
During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6,000, this being at cost
plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The
tax rate is 30%.
Required:
(i) Prepare the consolidation worksheet entries for Liala Ltd at 30 June 2017 in relation to the
intragroup transfers of inventory. I
(ii) Compute the amount of cost of goods sold to be reported in the consolidated income
statement for 2017 relating to the relevant intra-group sales.
b) On 1 July 2016, Liala Itd sold an item of plant to Jordan Ltd Ltd for $150,000 when its carrying value
in Liala Ltd book was $200,000 (costs $300,000, accumulated depreciation $100,000). This plant
has a remaining useful life of five (5) years form the date of sale. The group measures its property
plants and equipment using a costs model. Tax rate is 30 percent.
Required:
Prepare the necessary journal entries in 30 June 2017 to eliminate the intra-group transfer of
equipment.
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