Question
For each of the following intragroup transactions, assume that the consolidation process is being undertaken at 31 Dec 2015. Prepare the consolidation worksheet adjustment entries
For each of the following intragroup transactions, assume that the consolidation process is being undertaken at 31 Dec 2015. Prepare the consolidation worksheet adjustment entries for these transactions. All parts are independent unless specified. Maddison Ltd owns all the share capital of Anna Ltd. Tax rate is 30%.
a) On 1 July 2015, Maddison Ltd sold an item of plant to Anna Ltd for $1000. Immediately before the sale, Maddison Ltd had the item of plant on its accounts for $1500. Maddison Ltd depreciated items at 5% p.a. on the diminishing balance and Anna Ltd used the straight-line method over 10 years.
b) A non-current asset with a carrying amount of $1000 was sold by Maddison Ltd to Anna Ltd for $800 on 1 July 2015. Anna Ltd intended to use this item as inventory, being a seller of second-hand goods. Both entities charged depreciation at the rate of 10% p.a. on the diminishing balance on non-current assets. The item was still on hand at 31 Dec 2015.
c) On 1 Nov 2015, Anna Ltd sold inventory costing $200 to Maddison Ltd for $400 on credit. On 31 Dec 2015, only half of these goods had been sold by Maddison Ltd, but Maddison Ltd had paid $300 back to Anna Ltd.
d) During March 2015, Anna Ltd declared a $3000 dividend. The dividend was paid in August 2016.
e) In June 2015, Anna Ltd paid a $1500 interim dividend.
f) In August 2014, Maddison Ltd sold inventory to Anna Ltd for $6000, at a mark-up of 20% on cost. One-quarter of this inventory was unsold by Anna Ltd at 31 Dec 2014. In January 2015, Anna sold the remaining inventory.
g) On 1 July 2013, Anna Ltd sold a new tractor to Maddison Ltd for $20 000. This had cost Anna Ltd $16 000 on that day. Both entities charged depreciation at the rate of 10% p.a. on the diminishing balance.
h) Anna Ltd rented a spare warehouse to Maddison Ltd and also to Olivia Ltd during 2015. The total charge for the rental was $300, and Maddison Ltd and Olivia Ltd both agreed to pay half of this amount to Anna Ltd.
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