Henk Ltd owns all the share capital of Hilboro Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 2019 or 30 June 2020.

(a) On 1 May 2019, Hilboro Ltd sold inventories costing $200 to Henk Ltd for $400 on credit. On 30 June 2019, only half of these goods had been sold by Henk Ltd, and Henk Ltd had paid $300 to Hilboro Ltd. All remaining inventories were sold to external entities by 30 June 2020, and Henk Ltd paid the outstanding amount to Hilboro Ltd on 5 May 2020.

(b) On 1 January 2019, Henk Ltd sold an item of plant to Hilboro Ltd for $1000. Immediately before the sale, Henk Ltd had the item of the plant on its accounts for $1500. Henk Ltd depreciated items at 5% p.a. on the diminishing balance, and Hilboro Ltd used the straight-line method over 10 years.

(c) An inventories item with a cost of $1000 was sold by Henk Ltd to Hilboro Ltd for $800 on 1 January 2020. Hilboro Ltd intended to use this item as equipment. Both entities charge depreciation at the rate of 10% p.a. on the diminishing balance on non-current assets. The item was still on hand at 30 June 2020.

(d) Henk Ltd provided management services to Hilboro Ltd during the period ended 30 June 2020. The total charge for those services was $3000 that was unpaid at 30 June 2020.

(e) Henk Ltd borrows $50 000 from Hilboro Ltd on 1 July 2018 with an interest rate of 6% p.a. The loan is for 5 years. The interest is to be paid biannually in arrears, starting on 31 December 2018.

Requirements

Prepare adjusting journal entries for the consolidation worksheet at 30 June 2019 and 30 June 2020.	30 marks
Explain in detail why you made each adjusting journal entry.	10 marks