Exam 17: Consolidation: Intragroup Transactions

A Ltd sold an item of plant to B Ltd on 1 January 20X7 for $25 000.The asset had cost A Ltd $30 000 when acquired on 1 January 20X5.At that time the useful life of the plant was assessed at 6 years.The adjustment necessary on consolidation to reflect the tax effect of the depreciation adjustment for the year ended 30 June 20X7 will result in an increase in:

During the year ended 30 June 20X7,a parent entity rents a warehouse from a subsidiary entity for $100 000.The company tax rate is 30%.The consolidation adjustment entry needed at reporting date is:

Janus Limited,a subsidiary entity,sold a non-current asset at a profit to its parent entity.The adjustment necessary on consolidation to reflect the tax effect of this transaction will result in an:

If a dividend is paid out of profits that are earned after the acquisition date,it is known as:

A Ltd sold an item of plant to B Ltd on 1 January 20X7 for $25 000.The asset had cost A Ltd $30 000 when acquired on 1 January 20X5.At that time the useful life of the plant was assessed at 6 years.The consolidation elimination entries at 30 June 20X7 in relation to the sale of plant is (rounded to nearest dollar):

During the year ended 30 June 20X7 a subsidiary entity sold inventory to a parent entity for $30 000.The inventory had previously cost the subsidiary entity $24 000.By 30 June 20X7 the parent entity had sold 75% of the inventory to a party outside the group.The company tax rate is 30%.The adjustment entry in the consolidation worksheet at 30 June 20X8 is:

Discuss the concept of realisation and the implications for consolidated financial reporting.

AASB 10 Consolidated Financial Statements,requires that intragroup transactions be:

Explain why consolidation adjustments are necessary in relation to intra-group borrowings.

A subsidiary entity sold inventory to its parent entity at a profit of $4 000.The goods had originally cost the subsidiary $10 000.At the end of the year all the inventory was still on hand.The adjustment entry to deal with this transaction on consolidation would include the following line item:

When an entity sells a non-current asset at a profit to another entity within the same group the following adjustment is necessary on consolidation:

During the year ended 30 June 20X7 a subsidiary entity sold inventory to its parent entity at a profit of $8 000.The goods had originally cost the subsidiary $20 000.At the end of 30 June 20X7 all the inventory was still on hand.Ignoring tax effects,the adjustment entry to deal with this transaction on consolidation during the year ended 30 June 20X8 would include the following line item:

A subsidiary entity sold inventory to a parent entity for $30 000.The inventory had previously cost the subsidiary entity $24 000.By reporting date the parent entity had sold 75% of the inventory to a party outside the group.The company tax rate is 30%.The adjustment entry in the consolidation worksheet at reporting date is:

Explain the meaning of the term 'unrealised profits' in relation to the transfer of assets within a group of entities.

A subsidiary entity sold goods to its parent entity at a profit of $10 000.The goods had originally cost the subsidiary $15 000.At reporting date,the parent still held all of the goods.Which of the following adjustments must be included as part of the consolidation entry to eliminate this transaction?

In May 20X7,a parent entity sold inventory to a subsidiary entity for $30 000.The inventory had previously cost the parent entity $24 000.The entire inventory is still held by the subsidiary at reporting date,30 June 20X7.Ignoring tax effects,the adjustment entry in the consolidation worksheet at reporting date is:

Andronico Limited provided an advance of $500 000 to its subsidiary Galactico Limited.On consolidation the following adjustment is needed in relation to this intragroup advance:

A Ltd sold an item of plant to B Ltd on 1 January 20X7 for $25 000.The asset had cost A Ltd $30 000 when acquired on 1 January 20X5.At that time the useful life of the plant was assessed at 6 years.The adjustment necessary on consolidation in relation to the transfer of plant as at 30 June 20X8 will result in:

JoJo Ltd provided an advance of $500 000 to its subsidiary BoBo Ltd.Interest of $50 000 was charged during the year ended 30 June 20X8.On consolidation the following adjustment is needed at 30 June 20X8 in relation to the interest charged:

A parent entity group sold a depreciable non-current asset to a subsidiary entity for $2800.The asset originally cost $3000 and at the date of sale accumulated depreciation was $500.The amount of the unrealised gain on sale to be eliminated is: