Question
Leo Ltd owns 90% of the share capital of Command Ltd. On 1 January 2020, Command Ltd sold machinery to Leo Ltd for $80 000
Leo Ltd owns 90% of the share capital of Command Ltd.
On 1 January 2020, Command Ltd sold machinery to Leo Ltd for $80 000 cash. This machinery was carried at $65 000 in the records of Command Ltd at the time of sale.Leo depreciates the machinery using 10% straight-line method.The income tax rate is 30%.
A junior accountant working for Leo Ltd recorded the following consolidation adjustment for 30 June 2020:
Proceeds on sale of machineryDr80 000
CA of machinery soldCr65 000
MachineryCr15 000
Deferred tax assetDr4 500
Income tax expenseCr4 500
NCI share of profit/lossDr1 050
NCICr1 050
Accumulated depreciationD1 500
Depreciation expenseCr 1 500
Income tax expenseDr450
Deferred tax assetCr450
Discuss whether the entries are correct and complete.
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