Exam 19: Intra-Group Transactions

Parent sells plant to Subsidiary for $500 000 on January 1 20X9.The original cost to Parent was $400 000 on 1 January 20X7.The plant is depreciated straight line over ten years with no scrap value. The correct consolidation elimination entry for the plant, at 1 January 20X9, is: Dr Profit on sale \ 100000 Cr Plant \ 100000

Intra-group bills discounted with recourse during the reporting period require the following consolidation elimination: Dr Bills payable Cr Bills receivable

Tammam Ltd is the parent of Shud Ltd.On 1 January 20X3 Tammam sold inventory to Shud for $20 000.The profit margin on this inventory was $5 000.As of end of financial year, June 30, Shud still held all of this inventory.The tax rate is 30%. Which is the correct set of consolidation elimination entries for June 30 20X3 in respect of the inventory? This answer includes any tax-effect entries.

Pink Ltd is the parent Floyd Ltd.On 1 January 20X3 Pink made a loan to Floyd in the form of bills of exchange in the total amount of $80 000 face value.Floyd was required to repay the $80 000 amount (which included the interest component) on 1 October 20X3.On 1 February Pink discounted $20 000 of the bills with the Darkside bank, without recourse, and received $15 000 cash.Floyd was unaware of the discounting.The end of financial reporting year for the group is 30 June. Which is the correct set of consolidation entries for June 30 20X3 in respect of the bills of exchange?:

'Intra-group transactions will never give rise to tax-effect assets or liabilities'

Subsidiary buys inventory from parent at a transfer price of $150 000.The profit margin included in this was $50 000. The group will need to reduce its cost of sales by $100 000 in total.

The acceptor of a bill of exchange is conceptually the same as a borrower.

'If there are no intra-group transactions and no goodwill or discount on acquisition, the consolidated financial statements are an aggregate of those financial statements of the companies in a group.' This statement is:

Tammam Ltd is the parent of Shud Ltd.On 1 January 20X3 Tammam sold inventory to Shud for $20 000.The profit margin on this inventory was $5 000.As of end of financial year, June 30, Shud still held half of this inventory. Which is the correct set of consolidation elimination entries for June 30 20X3 in respect of the inventory?

Greenstreet Ltd owns 100% of the issued ordinary share capital of Bogart Ltd.During the year ended 31 March 20X1, Greenstreet Ltd provides cleaning services to Bogart Ltd for $4 000 000.The cost at fair value of these services was $1 000 000.Which consolidation elimination entry is required for this transaction for the year ended 31 March 20X1.

Wagner Ltd owns 100% of Korngold Ltd.For the year ended 30 April 20X1, Korngold Ltd reported a profit of $1 million.On 30 April 20X0, Korngold Ltd had sold inventory to Wagner Ltd for a $0.6 million profit.All of this inventory was sold by Wagner Ltd on 1 June 20X0.For the financial year ending 30 April 20X0, what is the effect of consolidation adjustment (if any) in the profit or loss statement, as a result of the profit on this sale?

Tammam Ltd is the parent of Shud Ltd.On 1 January 20X3 Tammam sold inventory to Shud for $20 000.The profit margin on this inventory was $5 000.As of end of financial year, June 30, Shud still held half of this inventory.The tax rate is 30%. Which is the correct set of consolidation elimination entries for June 30 20X3 in respect of the inventory? This solution includes any tax-effect items.

Stevie Ltd owns 100% of the issued ordinary share capital of Wright Ltd.Wright Ltd has 100 million ordinary shares on issue.During the year ended 31 March 20X1, Wright Ltd declared and paid an interim dividend of $0.15 per share from post-acquisition profits.What is the elimination entry (if any) for this financial year?

Tammam Ltd is the parent of Shud Ltd.On 1 January 20X3 Tammam sold inventory to Shud for $20 000.The profit margin on this inventory was $5 000.As of end of financial year, June 30, Shud still held all of this inventory. Which is the correct set of consolidation elimination entries for June 30 20X3 in respect of the inventory?

Tammam Ltd is the parent of Shud Ltd.On 1 January 20X3 Tammam sold inventory to Shud for $20 000.The profit margin on this inventory was $5 000.On 1 May 20X3, as a result of impairment testing, Shud was forced to write down the inventory to $10 000.As of end of financial year, June 30, Shud still held all of this inventory. Which is the correct set of consolidation elimination entries for June 30 20X3 in respect of the inventory?

It is not necessary to eliminate intra-group profit when assets sold within the group are sold later, but within the same reporting period, to an external party.

AASB 112 specifically exempts long-lived assets from giving rise to tax-effect assets and liabilities.

Pink Ltd is the parent Floyd Ltd.On 1 January 20X3 Pink made a loan to Floyd in the form of bills of exchange in the total amount of $80 000 face value.Floyd was required to repay the $80 000 amount (which included the interest component) on 1 October 20X3.On 1 February Pink discounted $20 000 of the bills with the Darkside bank and received $15 000 cash.The end of financial reporting year for the group is 30 June. From the group point of view, with regard to the bills, Pink is the:

When assets sold within the group are sold later, but within the same reporting period, to an external party, consolidated profit is then invariably the difference between the ultimate selling price and the original cost of the goods.

Pink Ltd is the parent Floyd Ltd.On 1 January 20X3 Pink made a loan to Floyd in the form of bills of exchange in the total amount of $80 000 face value.Floyd was required to repay the $80 000 amount (which included the interest component) on 1 October 20X3.On 1 February Pink discounted $20 000 of the bills with the Darkside bank, with recourse, and received $15 000 cash.Floyd was unaware of the discounting.The end of financial reporting year for the group is 30 June. Which is the correct set of consolidation entries for June 30 20X3 in respect of the bills of exchange?: