Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. For

Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis.

For each of the following independent scenarios in each of the independent parts:

(i) Prepare all the relevant journal entries in the separate financial statements of the respective companies.

(ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent.

(iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries.

Part 1

  1. On 20 December 20x1, a 70%-owned Subsidiary sold a piece of inventory X which it bought for $200,000 to its Parent for $300,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date.
  2. On 20 December 20x1, a 70%-owned Subsidiary sold a piece of inventory Y which it bought for $300,000 to its Parent for $200,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date.

(c) On 20 December 20x1, a 70%-owned Subsidiary sold a piece of inventory Z which it bought for $300,000 to its Parent for $200,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $190,000 on this date.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Managerial Accounting

Authors: Peter Brewer, Ray Garrison, Eric Noreen

9th Edition

1265672008, 978-1265672003

More Books

Students also viewed these Accounting questions

Question

Derive Eq. (15.73). Equation (15.73) B(q)=a* (9)b,

Answered: 1 week ago

Question

What are their resources?

Answered: 1 week ago