prepare adjusting journal entries for the consolidation worksheet for the year ended 30 June 2016

prepare adjusting journal entries for the consolidation worksheet for the year ended 30 June 2017

Question 1 (allow about 20 minutes) 16 marks Rome Ltd owns all the share capital of Milan Ltd. The income tax rate is 30%, and all income on sale of assets is taxable and expenses are deductible. The following transactions are independent, unless otherwise specified: 1. Milan Ltd paid $80 000 during the period ended 30 June 2016 for management fees for services provided by Rome Ltd 2. As at 30 June 2016 Rome Ltd was holding inventory it had purchased from Milan Ltd earlier that month for $30 000. The inventories had originally cost Milan Ltd $20 000. All inventory was sold by the end of August 2016. 3. Milan Ltd borrowed $200 000 from Rome Ltd on 1 July 2016 with an interest rate of 5% p.a. The interest is to be paid annually in arrears, starting on 30 June 2017. 4. On 1 July 2016, Milan Ltd sold a motor vehicle to Rome Ltd for $45 000. This had a carrying amount to Milan Ltd of $36 000. Both entities depreciate motor vehicles at a rate of 25% p.a. on cost. Required: (a) Prepare adjusting journal entries for the consolidation worksheet for the year ended 30 June 2016 (6 marks) (b) Prepare adjusting journal entries for the consolidation worksheet for the year ended 30 June 2017 (10 marks)