Current and prior periods intragroup transfers of non-current assets   LO2, 4 Fred Ltd owns all the share capital of Toby Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 2019 or 30 June 2020.

(a) Toby Ltd sold some land to Fred Ltd in December 2018. The land had originally cost Toby Ltd $25 000, but was sold to Fred Ltd for only $20 000. To help Fred Ltd pay for the land, Toby Ltd gave Fred Ltd an interest-free loan of $12 000, and the balance was paid in cash. The land was sold to external entities in June 2019 for $30 000 and immediately after that, Fred Ltd paid the amount owed to Toby Ltd.

(b) On 1 July 2018, Fred Ltd sold equipment costing $10 000 to Toby Ltd for $12 000. Fred Ltd had not charged any depreciation on the asset before the sale as it just purchased it from an external entity. Both entities depreciate items of equipment at 10% p.a. on cost. The equipment is still held by Toby Ltd at 30 June 2020.

(c) On 1 July 2018, Toby Ltd sold a building to Fred Ltd for $200 000 in cash. This item had an original cost of $500 000 and accumulated depreciation for Toby Ltd at time of sale of $250 000. The remaining useful life of that building is estimated to be 10 years and the future economic benefits are assumed to be derived consistently throughout the life. The building was sold to external entities on 1 April 2020 for $210 000.

(d) On 1 July 2019, Fred Ltd sold an item regarded as equipment, to Toby Ltd which regarded it as inventories. At the time of the sale, the carrying amount of the item to Fred Ltd was $5000 and it was sold to Toby Ltd for $4000. The item is sold to an external entity by Toby Ltd by 30 June 2020.

(e) On 1 October 2019, Fred Ltd sold an item of machinery to Toby Ltd for $6000. This item had cost Fred Ltd $4000. Fred Ltd regarded this item as inventories whereas Toby Ltd intended to use it as a non-current asset. Toby Ltd charges depreciation at the rate of 10% p.a. on cost. The machine was sold to external entities on 1 April 2020 for $5000. Required In relation to the above intragroup transactions: 1. prepare adjusting journal entries for the consolidation worksheet at 30 June 2019 and 30 June 2020 2. explain in detail why you made each adjusting journal entry.