Question 2 (10 marks)
On 1 January 2019 Liam Ltd acquired 90% of the issued shares of Ian Ltd. During the year ended 31 December 2019 the following intra group transactions occurred:
- Sales of inventory:
Ian Ltd sold inventory to Liam Ltd $360,000. This inventory costed Ian Ltd $300,000. At 31 December 2019 Liam Ltd held 50% of the inventory acquired from Ian Ltd.
Intragroup sale of equipment:
An item of equipment originally acquired by Liam Ltd on 1 January 2017 at a cost of $400,000 was sold to Ian Ltd on 1 January 2019 for $340,000. Liam Ltd had depreciated this asset at 10% per annum on a straight-line basis with no scrap value. There is no change in the asset expected life subsequent to the sale.
- During the year ended 31 December 2019 the following dividends were paid:
- Liam Ltd $100,000
- Ian Ltd $40,000
- On 30 June 2019 Liam Ltd lent Ian Ltd $100,000. Interest on this loan at 8% was paid up to 31 December 2019.
Required:
Prepare the consolidation journal entries required to eliminate the above intragroup transactions for the year ended 31 December 2019. Assume a tax rate of 30%.
Our Academic Assistance: service is all about doing research and being good at it. The more research one will do, the better the paper will turn out.