### Intragroup Inventory Transfers - Educational ExampleSky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities:- **Transaction 1:** - **Date:** 1 June 2020 - **Details:** Sky Ltd sold inventory to Jupiter Ltd for $12,000 - **By 30 June 2020:** Jupiter Ltd had sold 20% of this inventory to other entities for $3,000. - **The remaining 80%:** Sold to external entities by 30 June 2021 for $13,000.- **Transaction 2:** - **Period:** During the 2020–21 period - **Details:** Jupiter Ltd sold inventory to Sky Ltd for $6,000 at cost plus 20% markup. - **Remaining Inventory:** 20% remained on hand in Sky Ltd at 30 June 2021. - **Tax Rate:** 30%### Required:Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers.---#### Clarification on Transactions**Transaction 1 (1 June 2020):**- **Initial Sale:** Sky Ltd sells inventory to Jupiter Ltd for $12,000.- **Subsequent Sales:** - By 30 June 2020: 20% sold for $3,000. - By 30 June 2021: Remaining 80% sold for $13,000.**Transaction 2 (2020–21 Period):**- **Sale Details:** Jupiter Ltd sells inventory to Sky Ltd for $6,000 (including a 20% markup from cost).- **On-hand Inventory:** 20% remains at Sky Ltd as of 30 June 2021.- **Markup Details:** Cost markup of 20%.#### Note:- Tax implications with a tax rate of 30% need to be considered in consolidation adjustments.### Consolidation Worksheet EntriesBelow is an example of how the consolidation entries might be addressed. Given the complexity of the accountancy practices, additional context such as the specific accounting standards might be required.1. **Intercompany Sales Elimination:** - Debit Sales (Sky Ltd): $12,000 - Credit Cost of Goods Sold (Jupiter Ltd): $12,0002. **Profit Elimination

When a company acquires another company, it’s called consolidation or merger. The company which…

Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. . During the 2020-21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers.

Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. . During the 2020-21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On 1 July 2019, Silver Ltd, a reporting entity, acquired all of the issued shares of Brumby Ltd. As part of the settlement, Silver Ltd agreed to pay $1,700,000 on 1 July 2019 and $1,284,000 payable on 1 July 2020. The appropriate discount rate was 7% per annum. Silver Ltd also issued 475,000 shares of Silver Ltd to the shareholders of Brumby Ltd. At acquisition date, the fair value of the ordinary shares of Silver Ltd were $2.50 and the fair value of the ordinary shares of Brumby Ltd were $3.00. Brumby Ltd's shareholders' equity on 1 July 2019 consisted of the following: Issued capital $1,900,000 Retained earnings $650,000 Total shareholders' equity $ 2,550,000 At 1 July 2019, all of Brumby Ltd's net assets were recorded at fair value, except the following items: Carrying Amount Fair Value Machinery $1,120,000 $1,400,000 Brumby Ltd purchased the plant for $1,500,000. On 1 July 2019, the plant had an estimated remaining useful life of 7 years with zero residual value. Brumby Ltd is…
Pader Inc. acquired 75% of Mader Inc. ordinary shares. During 2020, Pader Inc. produced 200,000 balls at a cost of P79 each and sol 140,000 balls to Mader Inc. for P90 each. Mader Inc. sold 72,000 balls to unrelated parties for P117 each prior to December 31, 2020 and sold the remaining in early 2021 for P130 each. Both entities use perpetual inventory system. What amount of cost of goods sold should be reported in the consolidated income statement in 2020?* a. P 11,060,000 b. P 11,852,000 c. P 5,688,000 d. P 6,480,000
Please help me
On July 1, 2019, Killearn Company acquired 105,000 of the outstanding shares of Shaun Company for $19 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of July 1, 2019, the investee had assets with a book value of $5 million and liabilities of $1,101,500. At the time, Shaun held equipment appraised at $280,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $650,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $640,000 in 2019, $670,600 in…
Petro Ltd acquired 60% of Carlos Ltd’s 500,000 R1 equity shares on 1st January 2019 for a consideration of R5 cash per share. At the date of acquisition, net assets and liabilities in Carlos Ltd were valued at R1,600,000 and the fair value of the non-controlling interest was R800,000.Required:1. Determine the acquisition date.2. Calculate goodwill or gain on bargain purchase if any using Proportionate of Net Assets Method3. Calculate goodwill or gain on bargain purchase if any using Fair Value Method
Kent Ltd owns all of the shares of Lodh Ltd. In relation to the following intragrouptransactions, all parts of which are independent unless specified, prepare theconsolidation worksheet adjusting entries for preparation of the consolidated financialstatements as at 30 June 2020. Assume an income tax rate of 30%. a. On 1 January 2020, Kent Ltd sold inventory costing $10,000 to Lodh Ltd at a transfer (sale) price $16,000. Lodh Ltd sold half of this inventory to an external party for $10,000 (i.e., half of the inventory is remained with Lodh Ltd at the end of the year). b. During March 2018, Lodh Ltd paid a $5,500 interim dividend. c. Kent Ltd rented a spare warehouse to Lodh Ltd. The total charge for the rental was $6,000. Lodh Ltd paid the whole amount to Kent Ltd during the year. d. On 1 July 2019, Kent…
PRT acquired 100% of SUB's ordinary shares on 1 January 2019 for R1,136,000 when SUB's retained earnings were R260,000. At 1 January 2019 the fair value of the net assets of SUB exceeded their carrying value by R110,000. The remaining useful life of these assets was 11 years from acquisition. SUB has not issued any new shares since acquisition by PRT. SUB is PRT's only subsidiary. PRT calculated that goodwill in its subsidiary was impaired by 20 % at 31 December 2021. The equity of SUB as at 31 December 2021; R000 Ordinary share capital 430 Share premium 86 Retained earnings 324 -- 840 The retained earnings of PRT were R2,100,000 at 31 December 2021. Required: Calculate the amount that PRT should incluce in its consolidated statement of financial position as at 31 December 2021 for: (0 Goodwill Group retained earnings
a) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions occurred between the two entities: On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12,000, this inventory previously costed Liala Ltd $10,000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other entities for $3,000. The other 80% was all sold to external entities by 30 June 2017 for $13,000. During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6,000, this being at cost plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The tax rate is 30%. Required:(i) Prepare the consolidation worksheet entries for Liala Ltd at 30 June 2017 in relation to the intragroup transfers of inventory.(ii) Compute the amount of cost of goods sold to be reported in the consolidated income statement for 2017 relating to the relevant intra-group sales. b) On 1 July 2016, Liala ltd sold an item of plant to Jordan Ltd Ltd for…
On 1 July 2020 S Ltd acquired 60% of the issued shares of P Ltd. During the year ended 30 June 2021 the following intra group transactions occurred: Sales of inventory: P Ltd to S Ltd $200,000 (Cost to P Ltd $150,000) Intragroup inventory on hand 30 June 2021: S Ltd held 40% of the inventory acquired from P Ltd Intragroup sale of equipment An item of equipment originally acquired by S Ltd on 1 July 2018 at a cost of $200,000 was sold to P Ltd on 1 July 2020 for $170,000. S Ltd had depreciated this asset at 10% per annum on a straight line basis with no scrap value. Subsequent to the sale the expected useful life of the asset is a further 4 years. During the year ended 30 June 2021 the following dividends were paid: S Ltd $10,000 P Ltd $2,000 On 31 December 2020 S Ltd lent P Ltd $100,000. Interest on this loan at 6% was paid up to 30 June 2021. During the year ended 30 June 2021 P Ltd paid S Ltd $4,000 for management services. Required. Prepare the…
Ocean Ltd is the parent entity to the wholly owned subsidiaries of River Ltd, Creek Ltd, and Puddle Ltd. During the year ended 30 June 2022 the following transactions occurred within Ocean Ltd group. The perpetual inventory system has been adopted by all entities in the Ocean Ltd group and the tax rate is 30% for all accounting periods. On 01 July 2021 Ocean Ltd sold an item of equipment to Creek Ltd for $850,000 cash. The original cost of the equipment was $950,000. Ocean Ltd adopted an accounting policy whereby equipment was being depreciated on a straight line basis over its useful life of 8 years. The carrying amount of the equipment in Ocean Ltd financial statements at the date of sale was $520,000. Subsequent to the transfer, Creek Ltd depreciated the equipment on a straight line basis over its remaining useful life of 3 years. Required: Fill in the missing amount for the following accounts that will appear in the consolidated adjusting journal…
Maenetja Limited acquired 1000 shares in Manana Limited on 1 December 2014 at the fair value of R15 per share. Transaction costs amounted to R200. At the date of acquisition the company elected to recognize subsequent changes in the fair value of this investment in other comprehensive income (OCI). The company’s policy is to release any gains or losses resulting from these fair value adjustments to retained earnings when the shares are sold. On 31 December 2014 the market value of Manana Limited’s shares was R18. On 30 June 2015, 200 shares were sold for R19.50. The market value of the shares at 31 December 2015 was R14. What amount should be recorded as the closing amount on this investment
The following transactions occurred for the period ended regarding LL and its two subsidiaries L1 and L2: On January 1, 2020, LL acquired 60% of the outstanding common stocks of L1. On April 1, 2020, LL acquired 70% of the outstanding common stocks of L2. It is the policy of LL to account all its investment in subsidiary using cost method in its separate financial statements On May 1, 2020, LL sold inventory to L2 at a price of P100,000. On June 1, 2020, L2 resold the inventory coming from LL at a price of P150,000 as follows: 80% to unrelated parties and 20% to L1. On July 1, 2020, L1 sold a new set of inventory to L2 at a price of P200,000. On august 1, 2020, L2 resold the inventory coming from L1 at a price of P300,000 as follows: 40% to unrelated parties and 60% to LL. For the period ended December31, 2020, the affiliates reported the following sales revenue in their separate income statement: o LL – Sales Revenue P3,000,000 o…