Topic 5: Accounting for intra-group transactions Part II
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Topic 5: Accounting for intra-group transactions Part II
Week 5: Workshop Questions
Question 1
ABC Ltd owns all the share capital (100%) of XYZ Ltd. There are no other subsidiaries besides XYZ Ltd. The following transactions relate to the financial year ended 30 June 2023. The tax rate is 30%.
During the year ending 30 June 2023, XYZ Ltd sold inventory to ABC Ltd at $100 000. This inventory previously cost XYZ Ltd $70 000. At 30 June 2023, all of the inventory remained unsold by ABC Ltd.
During the year ending 30 June 2022, ABC Ltd sold inventory to XYZ Ltd for $50 000, recording a before-tax profit of $20 000. Half of this inventory remained unsold by XYZ Ltd at 1 July 2022.
On 1 July 2022, ABC Ltd sold a machinery to XYZ Ltd for $100 000. This machinery previously cost ABC Ltd $160 000 and had depreciated for $80 000. The remaining useful life on the 1 July 2022 is 5 years and the residual value is zero.
On 30 June 2023, ABC sold inventory to Xena Ltd for $100 000. ABC Ltd previously purchased this inventory from Bera Ltd for $30 000.
On 31 December 2022, ABC Ltd paid an interim dividend of $50 000 and XYZ Ltd paid an interim dividend of $20 000.
On 30 June 2023, ABC Ltd declared a final dividend of $20 000. On the same day, XYZ Ltd declared a $10 000 dividend.
On 30 June 2023, XYZ Ltd borrowed a $100 000 loan from ABC Ltd.
On 30 June 2023, XYZ Ltd paid $20 000 to ABC Ltd for consulting services.
Required:
Prepare the consolidated worksheet journal entries for the year ending 30 June 2023.
How would your consolidated journal entries pertaining to intragroup transaction (a) above differ if at 30 June 2023, 20% of this inventory remained unsold by ABC Ltd.?
How would your consolidated journal entries pertaining to intragroup transaction (a) above differ if at 30 June 2023, all of the inventory had been sold to an external party?
Question 2
Burwood Ltd acquired all the shares (100%) in Toorak Ltd for $1mil, on 1 July 2023. At the date of acquisition, the equity balances of the subsidiary were:
Share Capital$500 000 Retained Earnings$200 000
All the identifiable assets and liabilities of the subsidiary were recorded at fair value except as the following:
Carrying AmountFair Value
Plant$50 000$250 000
The cost of the plant is $100 000. Assume that the subsidiary has not recorded the revaluation in its own books and the income tax rate was 30%. The remaining useful life of the plant at 1 July 2023 was 5 years.
Additional information:
The management of Burwood Ltd. believes that goodwill acquired was impaired by $12,000 in the current financial year. Previous impairments of goodwill amounted to $32,000.
Burwood Ltd has declared a $30 000 final dividend and Toorak Ltd has declared a $20 000 final dividend at the end of 30 June 2025.
During the year ended 30 June 2025, Burwood Ltd sold inventory to Toorak for $300 000. This inventory had previously cost Burwood $200 000. 70% of this inventory had been sold to an external party.
During the year ended 30 June 2025, Toorak Ltd sold inventory to Burwood for $50 000. All of the inventory had been sold to an external party at the end of 30 June 2025.
On 1 January 2024, Toorak Ltd sold a plant to Burwood for $200 000. The cost of the plant was $300 000 and the remaining useful life was 5 years. The accumulated depreciation for the plant on 1 Jan 2024 was $150 000.
On 30 June 2025, Burwood paid $10 000 to Toorak Ltd for consulting services.
Required:
Prepare the consolidated journal entries for the year ending 30 June 2025.
