Black Ltd owns 100% of Canary Ltd.

At 1 July 2020, Black Ltd sold an item of plant to Canary Ltd for $210 000.

Black Ltd had originally paid $400 000 for the plant on 1 July 2018, when it had an expected useful life of 8 years.

The tax rate is 30%.

(a) To eliminate the gain/loss on sale of the asset for the year, the group accountant processes the following entry in the consolidation worksheet:

Dr Gain on sale $210 000

Cr Plant $210 000

Do you agree this treatment will eliminate the gain/loss for the year ending 30 June 2021? If so, why? If not, provide both an explanation of why not and the correct treatment.

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(b) The group accountant is unsure of what depreciation expense should be shown for the group in relation to this asset for the year ending 30 June 2021.

Provide an explanation to the group accountant of the depreciation expense that should be shown for the group and why this is the case.

Note: no marks awarded if no explanation as to why given!

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(c) Provide all consolidation/elimination entries related to this transaction for the year ending 30 June 2022 (space provided on page 7).

Note: journal must be presented in a professional manner (workings can be shown below)