subject: company accounting

Consolidation

Indigo Ltd gives $55 000 as an interest-free loan to Violet Ltd on 1 July 2019. Violet Ltd made a $20 000 repayment by 30 June 2020.Violet Ltd owns all the share capital of Indigo Ltd. The following transactions are independent:

1. Indigo Ltd rented a spare warehouse to Violet Ltd starting from 1 July 2019 for 1 year. The total charge for the rental was $3 500, and Violet Ltd paid half of this amount to Indigo Ltd on 1 January 2020 and the rest on 1 July 2020.
2. During March 2020, Indigo Ltd declared a $5000 dividend. The dividend was paid in August 2020.

Required

In relation to the above intragroup transactions:

1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2020.

2. Explain in detail why you made each adjusting journal entry.