(a) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for $8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate consolidation adjustment entries are as follows: Sales Dr15 000 Cost of Sales Cr 13 000 Inventory Cr 2 000 Deferred Tax Asset Dr 300 Income Tax ExpenseCr 300 Required (1) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entry. (ii) Determine the consolidation worksheet entries in the following year, assuming the inventory has been -sold, and explain the adjustments on a line-by-line basis.
(a) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for $8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate consolidation adjustment entries are as follows: Sales Dr15 000 Cost of Sales Cr 13 000 Inventory Cr 2 000 Deferred Tax Asset Dr 300 Income Tax ExpenseCr 300 Required (1) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis the correct adjustment entry. (ii) Determine the consolidation worksheet entries in the following year, assuming the inventory has been -sold, and explain the adjustments on a line-by-line basis.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Preview
File
Edit
View
Go
Tools
Window
Help
53% O
Thu 12:17 pm
DeX
a Screen Shot 2020-10-08 at 12.14.54 pm
Q Search
DOCX
porutc
en Shot
b...4.03 pm
Documents
1403421
4 / 7
en Shot
Images
(a) Jessica Ltd sold inventory during the current period to its wholly owned subsidiary, Amelie Ltd, for $15 000.
These items previously cost Jessica Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for
$8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen, maintains that the appropriate
consolidation adjustment entries are as follows:
..55.06 am
en Shot
PDF Documents
Sales
Dr15 000
...25.26 pm
Cr
Cr
Cost of Sales
13 000
Inventory
2 000
Deferred Tax Asset Dr
300
en Shot
Presentations
....25.16 pm
Income Tax ExpenseCr
300
Required
XML
(i) Discuss whether the entries suggested by Li Chen are correct, explaining on a line-by-line basis
the correct adjustment entry.
en Shot
customized-
...20.45 pm
capability.xml
(ii) Determine the consolidation worksheet entries in the following year, assuming the inventory
has been -sold, and explain the adjustments on a line-by-line basis.
ZIP
(b) On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its' carrying value in Liala Ltd book
was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5)
years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate
is 30 percent.
en Shot
Other
..52.18 pm
Required:
en Shot
Screenshots
...46.08 pm
Pass the necessary entries on 30 June 2017 and 30 June 2018 to eliminate the intra-group
transfer of equipment.'
en Shot
Screen Shot
...45.53 pm 2020-10...4.54 pm
OCT
1
1
étv A
Dex w
OCT
1
8.
étv
DeX W
00
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education