Green Ltd owns 100% of Arrow Ltd.

During the financial year ending 30 June 2021, Green Ltd sold inventory, originally costing $98 000, to Arrow Ltd for $180 000. Arrow Ltd sold inventory, originally costing $120 000, to Green Ltd for $160,000.

At year end 30 June 2021, Green Ltd has sold 40% of the inventory it purchased from Arrow Ltd outside the group, while Arrow Ltd still has 25% of the inventory it purchased from Green Ltd on hand. Tax rate is 30%.

(a) Why does this information create an elimination entry for consolidation purposes at year end?

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(b) What is the consolidation/elimination entry at 30 June 2021?

Note: all workings must be shown and the journal presented in a professional manner.

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(c) What is the consolidation/elimination entry for the item shown above at 30 June 2022?

Note: journal must be presented in a professional manner.

.Journal: