River Ltd holds all the issued capital of Stream Ltd.

a) During the financial year ended 30 June 2018, River Ltd sold inventory to Stream Ltd for $260 000. The inventory had originally cost River Ltd $215 000. As at 30 June 2018, 20% of the inventory remained unsold in Stream Ltds closing inventory.

b) River Ltds opening inventory includes inventory purchased from Stream Ltd for $109 000. The inventory had originally cost Stream Ltd $89 000.

Require:

Prepare all the required consolidation entries for the year ended 30 June 2018, assuming the tax rate is 30%.

Question 2

A Ltd owns all the share capital of B Ltd. In relation to the following intra-group transactions, all are independent transactions. The tax rate is 30%. Prepare the necessary consolidation adjusting journal entries for the year ended 30 June 2018:

A) In January 2018, A Ltd sells inventory to B Ltd for $15 000. This inventory had cost A Ltd $10 000, and it remains unsold by B Ltd at the end of the reporting period.

b)All the inventory in (a) above is sold C Ltd an external party for $20 000 on 2 February 2018.

c)Half of the inventory in (a) above is sold to D Ltd, an external party, for $9 000 on 3 March 2018 and the remainder is still on hand at the end of the current reporting period.

d)On 1 July 2017 A Ltd sold an item of plant to B Ltd for $145 000 when its carrying amount in As accounts was $101 250 (cost $168 750, accumulated depreciation of $ 67 500). This plant is assessed as having a remaining useful life of six years.

e)On 1 July 2016 A Ltd sold an item of plant to B Ltd for $145 000 when its carrying amount in As accounts was $101 250 (cost $168 750, accumulated depreciation of $ 67 500). This plant is assessed as having a remaining useful life of six years.

f) A Ltd paid management fees of $ 45 000 to B Ltd during the year.