Question 1

Parent Ltd owns all the share capital of Subsidiary Ltd. The following transactions relate to the financial year ended 30 June 2020. The tax rate is 30%.

1. During the year ended 30 June 2020, Subsidiary Ltd sold $200,000 worth of inventory to Parent Ltd. Subsidiary Ltd recorded a $40,000 profit before tax on this transaction. Parent Ltd has one-quarter of the inventory still on hand at the end of the financial year.

2.On 25 June 2020, Parent Ltd declared a dividend of $40,000. On the same day Subsidiary Ltd declared a $20,000 dividend.

3.On 1 December 2019, Subsidiary leased surplus office space to Parent, at a rental payment of $18,000 per month. Rent is payable half-yearly in advance, on 1 December and 1 June each year.

Requirement:

Prepare the Consolidation Journal entries for the financial year ended 30 June 2020. [Narrations are NOT required].