subject: company accounting Consolidation Indigo Ltd gives $55 000 as an interest-free loan to Violet Ltd on...

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Accounting

subject: company accounting
  Consolidation

Indigo Ltd gives $55 000 as an interest-free loan to VioletLtd on 1 July 2019. Violet Ltd made a $20 000 repayment by 30 June2020.Violet Ltd owns all the share capital of Indigo Ltd. Thefollowing transactions are independent:
Indigo Ltd rented a spare warehouse to Violet Ltdstarting from 1 July 2019 for 1 year. The total charge for therental was $3 500, and Violet Ltd paid half of this amount toIndigo Ltd on 1 January 2020 and the rest on 1 July2020.
During March 2020, Indigo Ltd declared a $5000dividend. The dividend was paid in August 2020.
Required
In relation to the above intragrouptransactions:
1.      Prepareadjusting journal entries for the consolidation worksheet at 30June 2020.
2.     Explain indetail why you made each adjusting journal entry.

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Ans Adjusting entries are passed in consolidated financial statements for netting off income and expenses of intra group transactions so that consoliated financial statements are prepared net off intra group transactions and shows real external profit of group Following are adjusting See Answer

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