Question 11 (16 points)

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Ocean Ltd is a wholly-owned subsidiary of Breeze Ltd. The rate of company income tax is 30%. During the year ended 30 June 2017 the accounts revealed:

i Ocean Ltd paid management fees of $15,000 to Breeze Ltd.

iiBreeze Ltd sold inventory for $17,500 to parties external to the group. Ocean Ltd had previously sold this inventory to Breeze Ltd for $15,000. The inventory had cost Ocean Ltd $10,000.

iii Breeze Ltd sold inventory to Ocean Ltd for $40,000. This inventory had cost Breeze Ltd $20,000. Ocean Ltd sold three-quarters of this inventory to parties external to the group.

iv On 1 July 2016, Ocean Ltd sold machinery to Breeze Ltd for $150,000. The machinery was originally purchased by Ocean Ltd on 1 July 2012. The carrying amount of the machinery at the time of sale was $120,000 (cost $200,000, accumulated depreciation $80,000). The machinery is assessed as having a remaining useful life of 5 years from the date of sale. Straight-line depreciation is used.

Required

A) Prepare the consolidation elimination journal entries required for the above intra-group transactions.Show workings and calculations.