90.2K

Verified Solution

Link Copied!

3. Intragroup transfers of inventories, non-current assets, services and dividends Miller Ltd owns all the share capital of Scott Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 20X3 to 30 June 20X5. (a) On 1 January 20X3, Miller Ltd sold inventories to Scott Lid for $6000, at a mark-up of 20% on cost. One-quarter of this inventories were unsold by Scott Ltd at 30 June 20X3 to external parties and none at 30 June 20X4. (b) On 1 March 20X3, Scott Lid sold a new tractor to Miller Ltd for $20 000. This had cost Scott Lid $16 000 on that day. Both entities charged depreciation at the rate of 10% p.a. on the diminishing balance. The tractor was still on hand with Miller Ltd at 30 June 20X5. (c) On 1 January 20X5, a non-current asset with a carrying amount of $1000 was sold by Miller Ltd to Scott Lid for $800. Scott Lid intended to use this item as inventories, being a seller of second-hand goods. The item was still on hand at 30 June 20X5. (d) Onl July 20X4 Scott Lid rented a spare warehouse to Miller Ltd starting for 1 year. The total charge for the rental was $300, and Miller Lid paid half of this amount to Scott Lid on 1 January 20X5 and the rest is to be paid on 1 July 20X5. (e) In December 20X4, Scott Ltd paid a $1500 interim dividend. (f) During March 20X5, Scott Lid declared a $3000 dividend. The dividend was paid in August 20X5. Required In relation to the above intragroup transactions: i) Prepare adjusting journal entries for the consolidation worksheet at 30 June 20X4 and 30 June 20X5. ii) Explain in detail why you made each adjusting journal entry

Answer & Explanation Solved by verified expert

See Answer