Exam 29: Further Consolidation Issues I: Accounting for Intragroup Transact

Dividends may be identified as being paid out of pre-acquisition or post-acquisition profits by a subsidiary company.Where dividends are paid out of post-acquisition profits the investment in the subsidiary should be decreased by the amount of the dividend.

Aladdin Ltd sells inventory for a profit to its subsidiary,Jasmine Ltd,to be used as machinery in Jasmine Ltd's production process.The consolidation worksheet of Aladdin Ltd with respect to this transaction only should ?not include .....:

Aladdin Ltd sold inventory items (with a cost of $100 000)to its subsidiary Genie Ltd for $120,000.Half of the inventory items were sold by Genie Ltd to external parties before the financial year end.Ignoring taxes,which of the following statements is correct with respect to this transaction only?

Zeus Ltd owns 100 per cent of the issued capital of Ares Ltd.On 1 July 2005 Zeus Ltd purchased an item of equipment from Ares Ltd for $800,000.Ares had owned the equipment for 2 years.It originally cost $890,000 and the accumulated depreciation was $178,000 at the time of sale.The equipment has been depreciated over this time,but not written down or revalued.The remaining useful life of the equipment at 1 July 2005 is estimated to be 8 years.Zeus Ltd expects the benefits to be obtained from the equipment to be evenly received over its useful life.The tax rate is 30 per cent. What are the consolidation journal entries required for this inter-company transaction for the period ended 30 June 2007?

Monster Co Ltd owns 100 per cent of the issued shares of Mini Co Ltd.Mini Co Ltd declared a dividend of $100,000 for the period ended 30 June 2004.Monster Co Ltd accrues dividends when they are declared by its subsidiaries.What elimination entry would be required to prepare the consolidated financial statements for the group for the period ended 30 June 2005?

Intragroup profits are eliminated in consolidation to reduce consolidated profits.