n 1 July 2019, Canola Ltd acquired 100% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the financial year ending 30 June 2020. (i) During the 2019 - 2010 financial year, Canola Ltd sold inventory to Palm Ltd for $1,000,000. Canola Ltd purchased this inventory at $700,000. By 30 June 2020, Palm Ltd has sold 70% of that inventory to an outside third party. (ii) Palm Ltd sold a vehicle to Canola Ltd for $100000. The vehicle had been fully depreciated by Palm Ltd at 30 June 2020 and valued at $0 on Palm’s books. Required:
n 1 July 2019, Canola Ltd acquired 100% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the financial year ending 30 June 2020. (i) During the 2019 - 2010 financial year, Canola Ltd sold inventory to Palm Ltd for $1,000,000. Canola Ltd purchased this inventory at $700,000. By 30 June 2020, Palm Ltd has sold 70% of that inventory to an outside third party. (ii) Palm Ltd sold a vehicle to Canola Ltd for $100000. The vehicle had been fully depreciated by Palm Ltd at 30 June 2020 and valued at $0 on Palm’s books. Required:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On 1 July 2019, Canola Ltd acquired 100% of the share
(i) During the 2019 - 2010 financial year, Canola Ltd sold inventory to Palm Ltd for $1,000,000. Canola Ltd purchased this inventory at $700,000. By 30 June 2020, Palm Ltd has sold 70% of that inventory to an outside third party.
(ii) Palm Ltd sold a vehicle to Canola Ltd for $100000. The vehicle had been fully
Required:
- Prepare the
journal entries required to eliminate the intra-group transactions above. Ignore any tax effects. - When are consolidated profits recorded for inventory transfers within the group?
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