Exam 19: Intra-Group Transactions

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 in 20X3, what is the consolidation adjustment (if any) in the financial statements, as a result of the profit on this sale?

You hear the following statement made at a conference: 'If, on 1 September 20X3 a company lent money to its wholly owned subsidiary, with interest payable annually in arrears for five years; then the only journal entry required when preparing the consolidated profit or loss statement for the year ending 30 June 20X5 would be to debit the interest income account and credit the interest expense account.' This statement is:

The following is the only consolidation elimination entry required for an intra-group loan made and repaid during the reporting period: Dr Loan payable Cr Loan receivable

Bon Ltd owns 100% of the issued ordinary share capital of Jovi Ltd.On June 30 20X1, Bon Ltd issued 1000 eight year debentures of face amount $100 each, paying 10% pa interest.These debentures were issued to the general public, to persons not related to the Bon Group.On July 1 20X4 Jovi bought all these debentures on a stock exchange.The sale price totaled $80 000.What is the elimination entry (if any) for the financial year ended June 30 20X5?

Belgium Ltd is the parent of France Ltd.On 1 January 20X3 Belgium sold a plant to France for $120 000.The plant had cost Belgium $100 000 on 1 January 20X1 and had been depreciated straight line over ten years with no scrap value.France used the same depreciation estimates but based their depreciation amounts on the transfer sale price.Both companies use the cost model. Which is the correct set of consolidation elimination entries for 31 December 20X4 in respect of the plant?

Intra-group transactions on inventory always give rise to a deferred tax asset because CA>group CA.

Waverley Ltd sold a non-current asset to Park Ltd on 1 January 20X0 for a profit of $100 000.The sale proceeds was $1 000 000.Waverley Ltd had paid $1 800 000 for this asset.Both companies have a financial year end of 31 December.Waverley was depreciating this asset straight-line over a total useful life of 10 years to a zero residual amount.The asset had a carrying amount of $900 000 on the sale date.Park Ltd uses the same useful life and residual value as Waverley Ltd.What is the last financial year that elimination entries will be required for this asset? The financial year ended 31 December:

Where the drawer and acceptor are both members of the same group, which of the following statements is true:

When eliminating an intra-group sale of a non-current asset only the sale price and any profit on sale need be eliminated.

On 1 July 20X0 Home Ltd lent $10 million to its wholly-owned subsidiary - Loan Ltd.The loan is for a term of 10 years at a fixed rate of 15% per annum.Loan Ltd pays this interest each year on 30 June.What is the elimination entry for the year ended 30 June 2001?