Question 3

M Ltd owns all of the issued capital of W Ltd. The following intra group transactions occurred during the year ended

3q" June 2021.

During the year ended 30th June 2021 W Ltd sold $50,000 of inventory to M Ltd recorded a profit before tax of

$10,000 on these transactions. At 30 June 2021 M Ltd has 2506 of these goods on hand.

W Led sold a warehouse to M Ltd for $100,000 on 1 January 2021. This had originally cost W Ltd $82,000. M

Ltd charges depreciation at 5% per annum on a straight line ba

3.

During the year ended 30th June 2021 M Ltd sold inventory costing $12,000 to W Ltd for $18,000. Two thirds of

this inventory was sold to external parties during the year.

4.

In June 2021 M Ltd declared a dividend of $10,000 and W Ltd declared a dividend of $5000.

5.

On 1 October 2008 M Ltd issued 1000 10% debentures of $100 each. W Ltd purchased 400 of these

debentures. Interest has been paid up to30 June 2021.

6.

M Ltd rented a warehouse to W Ltd and to another company China Ltd during the year ended 30th June 2021.

The total rent for the year was $3000 which was paid equally by W Ltd and China.

Required

Prepare the consolidation journal entries required for the consolidation of M Ltd and W Ltd for the year ended 303th

June 2021. Assume a tax rate of 30%.