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Apple Ltd Owns All the Issued Capital of Pear Ltd

Question 15

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Apple Ltd owns all the issued capital of Pear Ltd.On 1 July 2014,Pear Ltd purchased an item of plant from Apple Ltd for $1 000 000.Apple Ltd had owned the plant for 5 years.It originally cost $1 350 000 and the accumulated depreciation at 1 July 2004 is $562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016?


A)
Apple Ltd owns all the issued capital of Pear Ltd.On 1 July 2014,Pear Ltd purchased an item of plant from Apple Ltd for $1 000 000.Apple Ltd had owned the plant for 5 years.It originally cost $1 350 000 and the accumulated depreciation at 1 July 2004 is $562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016? A) B) C) \text { Period ended } 30 \text { June 2015: }\\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & {\text { Gain on sale }} &212500 & \\ \hline \mathrm{Cr} & \text { Plant } & &212500 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & &24107 \\ \hline\\\hline \end{array} \begin{array}{l} \text { Period ended } 30 \text { June 2016: }\\ \begin{array}{|c|l|r|r|} \hline & & & \\ \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\ \hline \mathrm{Cr} & \text { Plant } & & 148750 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \\ \hline \end{array} \end{array} D)
B)
Apple Ltd owns all the issued capital of Pear Ltd.On 1 July 2014,Pear Ltd purchased an item of plant from Apple Ltd for $1 000 000.Apple Ltd had owned the plant for 5 years.It originally cost $1 350 000 and the accumulated depreciation at 1 July 2004 is $562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016? A) B) C) \text { Period ended } 30 \text { June 2015: }\\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & {\text { Gain on sale }} &212500 & \\ \hline \mathrm{Cr} & \text { Plant } & &212500 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & &24107 \\ \hline\\\hline \end{array} \begin{array}{l} \text { Period ended } 30 \text { June 2016: }\\ \begin{array}{|c|l|r|r|} \hline & & & \\ \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\ \hline \mathrm{Cr} & \text { Plant } & & 148750 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \\ \hline \end{array} \end{array} D)
C)
 Period ended 30 June 2015: Dr Gain on sale 212500Cr Plant 212500Dr Accumulated depreciation - plant 80357Cr Depreciation expense 80357Dr Income tax expense 24107Cr Deferred tax asset 24107\text { Period ended } 30 \text { June 2015: }\\\begin{array}{|c|l|r|r|}\hline \mathrm{Dr} & {\text { Gain on sale }} &212500 & \\\hline \mathrm{Cr} & \text { Plant } & &212500 \\\hline & & & \\\hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \\\hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\\hline & & & \\\hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\\hline \mathrm{Cr} & \text { Deferred tax asset } & &24107 \\\hline\\\hline\end{array}
 Period ended 30 June 2016: Dr Opening retained earnings 148750Cr Plant 148750Dr Accumulated depreciation - plant 80357Cr Depreciation expense 80357Dr Income tax expense 24107Cr Deferred tax asset 24107\begin{array}{l}\text { Period ended } 30 \text { June 2016: }\\\begin{array}{|c|l|r|r|}\hline & & & \\\hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\\hline \mathrm{Cr} & \text { Plant } & & 148750 \\\hline & & & \\\hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \\\hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\\hline & & & \\\hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\\hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \\\hline\end{array}\end{array}
D)
Apple Ltd owns all the issued capital of Pear Ltd.On 1 July 2014,Pear Ltd purchased an item of plant from Apple Ltd for $1 000 000.Apple Ltd had owned the plant for 5 years.It originally cost $1 350 000 and the accumulated depreciation at 1 July 2004 is $562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016? A) B) C) \text { Period ended } 30 \text { June 2015: }\\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & {\text { Gain on sale }} &212500 & \\ \hline \mathrm{Cr} & \text { Plant } & &212500 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & &24107 \\ \hline\\\hline \end{array} \begin{array}{l} \text { Period ended } 30 \text { June 2016: }\\ \begin{array}{|c|l|r|r|} \hline & & & \\ \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\ \hline \mathrm{Cr} & \text { Plant } & & 148750 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \\ \hline \end{array} \end{array} D)

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