First question

Rivervale Ltd sold an item of plant to its subsidiary Valley Ltd on1 January 2018for $100 000. The asset had cost Rivervale Ltd $120 000 when acquired on 1 January 2016. At that time the remaining useful life of the plant was assessed to be 5 years.

Analysis: Gain on disposal made by Intercompany on 1 January 2018 = $100k (sales proceeds) - $ 72 000 (carrying amount of the plant before disposal (120k/5 x 3 remaining useful life)) = $28 000.

The adjustment necessary on consolidation as at30 June 2019in relation to the gain or loss on thesale of plant in the prior yearwill result in:

A. a decrease in retained earnings and an increase in current year profit.

B. an increase in retained earnings and a decrease in current year profit.

C. a decrease in retained earnings and a decrease in current year profit.

D. an increase in retained earnings and an increase in current year profit.

Second question

Raymond Limited sold inventories to its parent entity, Alan Limited, at a before-tax profit of $18 000. The inventories originally cost Raymond Limited $62 000. At balance sheet date, Alan Limited had sold 65% of the inventories to an external party. The consolidation adjustment entry (excluding tax effects) line will eliminate unrealised profit amounting to:

A. $11 700.

B. $6 300.

C. $18 000.

D. $15 400.

Third Question

During the year ending 30 June 2019, a parent entity rents a warehouse from a subsidiary entity for $100 000. The company tax rate is 30%. Which of the following is the consolidation adjustment entries needed at reporting date to eliminate these intragroup transactions?

A. Dr. Rent expense 100 000

Cr. Rent revenue 100 000

B. Dr. Rent income 100 000

Cr. Rent expense 100 000

Dr. Income tax expense 30 000

Cr. Deferred tax liability 30 000

C. Dr. Rent income 100 000

Cr. Rent expense 100 000

D. Dr. Rent expense 100 000

Cr. Rent income 100 000

Dr. Deferred tax asset 30 000

Cr. Income tax expense 30 000

Forth Question

If a second interim dividend is paid by a subsidiary to its parent, the consolidation entries to eliminate the transaction is which of the following?

Group of answer choices

A. Dr Interim dividend paid

Cr Cash

B. Dr Dividend revenue

Cr Interim dividend paid

C. Dr Interim dividend paid

Cr Dividend revenue

D. Dr Dividend revenue

Cr Dividend payable

Fifth question

George Limited provided a loan of $150 000 to its subsidiary Amanda Limited. On consolidation, which of the following adjustments are needed in relation to this intragroup loan (principal amount)? Interest is 10% per annum.

A. DrLoan to George Ltd$150 000

CrLoan from Amanda Ltd$150 000

B. No aGroup of answer choicesdjustment is needed.

C. DrLoan from George Ltd$150 000

CrLoan to Amanda Ltd$150 000

D. Dr Loan receivable$150 000

CrLoan payable$150 000

Sixth Question

Jennifer Ltd provided an advance of $500 000 to its subsidiary Lawrence Ltd. Interest of 10% per annum was charged during the year ended 30 June 2019. On consolidation, which of the following adjustments are needed at 30 June 2019 in relation to the intragroup interest charged?

A. DrInterest expense$50 000

Cr Cash$50 000

B. DrInterest income$50 000

CrInterest expense$50 000

C. No adjustment is needed.

D. DrInterest expense$500 000

CrInterest income$500 000