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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Intragroup Inventory Transfers - Educational Example
Sky 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 Entries
Below 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): $12,000
2. **Profit Elimination
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