Consolidation: intra-group transactions Poh Ltd owns all the share capital of Soh Ltd. The income tax rate is 30%. During the period ended 30 June 2023, the following transactions took place: a) Soh Ltd sold inventories costing $65 000 to Poh Ltd. Soh Ltd recorded a $15 000 profit before tax on these transactions. At 30 June 2023, Poh Ltd has none of these goods still on hand. b) Poh Ltd sold inventories costing $20 000 to Soh Ltd for $45 000. By 30 June 2023, two-fifths of these were sold to Wan Ltd for $24 250 and two-fifths to Lan Ltd for $23 500; the rest are still on hand with Soh Ltd. Wan Ltd and Lan Ltd are external entities. c) On 1 January 2023, Poh Ltd sold land for cash to Soh Ltd at $20 000 above cost. The land is still on hand with Soh Ltd. d) Soh Ltd sold a warehouse to Poh Ltd for $100 000 on 1 July 2022. The carrying amount of this warehouse recognised by Soh Ltd at the time of sale was $80 000. Poh Ltd charges depreciation at a rate of 3% p.a. on cost. Required In relation to the above intragroup transactions: 1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2023. 2. Explain briefly why adjusting journal entries are necessary for a), b), c) and d) mentioned above.
Consolidation: intra-group transactions Poh Ltd owns all the share capital of Soh Ltd. The income tax rate is 30%. During the period ended 30 June 2023, the following transactions took place: a) Soh Ltd sold inventories costing $65 000 to Poh Ltd. Soh Ltd recorded a $15 000 profit before tax on these transactions. At 30 June 2023, Poh Ltd has none of these goods still on hand. b) Poh Ltd sold inventories costing $20 000 to Soh Ltd for $45 000. By 30 June 2023, two-fifths of these were sold to Wan Ltd for $24 250 and two-fifths to Lan Ltd for $23 500; the rest are still on hand with Soh Ltd. Wan Ltd and Lan Ltd are external entities. c) On 1 January 2023, Poh Ltd sold land for cash to Soh Ltd at $20 000 above cost. The land is still on hand with Soh Ltd. d) Soh Ltd sold a warehouse to Poh Ltd for $100 000 on 1 July 2022. The carrying amount of this warehouse recognised by Soh Ltd at the time of sale was $80 000. Poh Ltd charges depreciation at a rate of 3% p.a. on cost. Required In relation to the above intragroup transactions: 1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2023. 2. Explain briefly why adjusting journal entries are necessary for a), b), c) and d) mentioned above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consolidation: intra-group transactions
Poh Ltd owns all the share capital of Soh Ltd. The income tax rate is 30%. During the
period ended 30 June 2023, the following transactions took place:
a) Soh Ltd sold inventories costing $65 000 to Poh Ltd. Soh Ltd recorded a $15 000
profit before tax on these transactions. At 30 June 2023, Poh Ltd has none of
these goods still on hand.
b) Poh Ltd sold inventories costing $20 000 to Soh Ltd for $45 000. By 30 June 2023,
two-fifths of these were sold to Wan Ltd for $24 250 and two-fifths to Lan Ltd for
$23 500; the rest are still on hand with Soh Ltd. Wan Ltd and Lan Ltd are external
entities.
c) On 1 January 2023, Poh Ltd sold land for cash to Soh Ltd at $20 000 above cost.
The land is still on hand with Soh Ltd.
d) Soh Ltd sold a warehouse to Poh Ltd for $100 000 on 1 July 2022. The carrying
amount of this warehouse recognised by Soh Ltd at the time of sale was $80 000.
Poh Ltd charges depreciation at a rate of 3% p.a. on cost.
Required
In relation to the above intragroup transactions:
1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2023.
2. Explain briefly why adjusting journal entries are necessary for a), b), c) and d)
mentioned above.
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