Positive ltd acquired an 80% stake in Strong Ltd in 20x1. During the year 20x2, the following inter-company transactions took place. • Positive extended a loan of $200,000 to Strong on 1 April 20x2 with an interest rate of 4% per annum. Interest for the year ended 31 December 20x2 had not been
Positive ltd acquired an 80% stake in Strong Ltd in 20x1. During the year 20x2, the following inter-company transactions took place.
• Positive extended a loan of $200,000 to Strong on 1 April 20x2 with an interest rate of 4% per annum. Interest for the year ended 31 December 20x2 had not been paid but were recorded in the books of both companies appropriately.
• Strong sold some inventory to Positive for $80,000 at a margin of 5%. Half of these goods were still unsold at the end of the year. As at 31 December 20x2, Positive’s records showed that it owed Strong $20,000 but the latter’s financial statements indicated a receivable of $30,000. The difference had been attributed to a payment made by Positive that was still being processed by the bank.
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