Hi guy, I got the solution for this question. But I can't work out in some sub-question that how the number comes from in highlight one on 30 Jun 2023.
Can anyone explain to me in detailly please? Please help. thank you.
Exercise 28.3 Current and prior periods intragroup transfers of non-current assets Sophie Ltd owns all the share capital of Ruby Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 2022 or 30 June 2023. (a) On 1 July 2021, Sophie Ltd sold a motor vehicle to Ruby Ltd for $15 000. This had a carrying amount to Sophie Ltd of $12 000. Both entities depreciate motor vehicles at a rate of 10% p.a. on cost. (b) Ruby Ltd manufactures items of machinery which are used as property, plant and equipment by other companies, including Sophie Ltd. On 1 January 2022, Ruby Ltd sold such an item to Sophie Ltd for $62 000, its cost to Ruby Ltd being only $55 000 to manufacture. Sophie Ltd charges depreciation on these machines at 20% p.a. on the diminishing value. (c) Sophie Ltd manufactures certain items which it then markets through Ruby Ltd. During the period ended 30 June 2023, Sophie Ltd sold for $12 000 items to Ruby Ltd at cost plus 20%. By 30 June 2023, Ruby Ltd has sold to external entities 75% of these transferred items. (d) Ruby Ltd also sells second-hand machinery. Sophie Ltd sold one of its depreciable assets (original cost $40 000, accumulated depreciation S32 000) to Ruby Ltd for $5000 on 1 January 2023. Ruby Ltd had not resold the item by 30 June 2023. (e) Ruby Ltd sold a depreciable asset (carrying amount of $22 000) to Sophie Ltd on 1 January 2022 for $25 000. Both entities charge depreciation in relation to these items at a rate of 10% p.a. on cost. On 31 December 2022, Sophie Ltd sold this asset to Dubbo Ltd, an external entity, for $20 000. Required In relation to the above intragroup transactions: 1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2022 and 30 June 2023. Solution 1. At 30 June 2022, there will only be adjusting entries for transactions (a), (b) and (e) as these are the only transactions related to the financial period ended 30 June 2022. At 30 June 2023, there will be adjusting entries for all transactions. 30 June 2022 (a) Proceeds on sale of motor vehicle Dr 15 000 Carrying amount of motor vehicle sold Cr 12 000 Motor vehicles Cr 3 000 OR 3 000 Gain on sale of vehicles Motor vehicles Dr Cr 3 000 Dr 900 Deferred tax asset Income tax expense 900 Dr 300 Accumulated depreciation - motor vehicle Depreciation expense 300 90 Income tax expense Deferred tax asset Dr Cr 90 (b) 62 000 Sales revenue Cost of sales Machinery Deferred tax asset Income tax expense Dr Cr Cr Dr Cr 55 000 7 000 2 100 2 100 700 Accumulated depreciation - machinery Depreciation expense Dr Cr 700 210 Income tax expense Deferred tax asset Dr Cr 210 25 000 Dr Cr Cr 22 000 3 000 3 000 (e) Proceeds on sale of depreciable asset Carrying amount of asset sold Depreciable asset OR Gain on sale of depreciable asset Depreciable asset Deferred tax asset Income tax expense Accumulated depreciation - depreciable asset Depreciation expense Dr Cr 3 000 900 Dr Cr 900 150 Dr Cr 150 45 Income tax expense Deferred tax asset Dr Cr 45 30 June 2023 (a) Retained earnings (1/7/22) Motor vehicles 3 000 Dr Cr 3 000 900 Deferred tax asset Retained earnings (1/7/22) Dr Cr 900 600 Dr Cr Cr 300 300 Accumulated depreciation - motor vehicle Depreciation expense Retained earnings (1/7/22) Retained earnings (1/7/22) Income tax expense Deferred tax asset (b) Retained earnings (1/7/22) Machinery Dr Dr Cr 90 90 180 7 000 Dr Cr 7 000 2 100 Deferred tax asset Retained earnings (1/7/22) Dr Cr 2 100 1960 Accumulated depreciation - machinery Depreciation expense Retained earnings (1/7/22) Retained earnings (1/7/22) Income tax expense Deferred tax asset Dr Cr Cr Dr Dr 1 260 700 210 378 5 588
