Question
Kangaroo Ltd owns all of the share capital of Wallaby Ltd. In relation to the following intragroup transactions, all parts of which are independent unless
Kangaroo Ltd owns all of the share capital of Wallaby Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2020. Assume an income tax rate of 30%.
(a)During the year ending 30 June 2020, Wallaby Ltd sold $120 000 worth of inventory to Kangaroo Ltd. Wallaby Ltd recorded an $18 000 profit before tax on these transactions. At 30 June 2020, Kangaroo Ltd has one-third of these goods still on hand.(5 marks)
(b)A non-current asset with a carrying amount of $4 800 was sold by Wallaby Ltd to Kangaroo Ltd for $3 600 on 1 January 2020. Kangaroo 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 30 June 2020.
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