1 Question 14 (25 marks) The X LTD Group was established on 1 January 20X0 as follows: 80% 60% X LTD Z LTD Y LTD Details about intra-group transactions and balances are set out below. 1. Sale of inventory from X to Z during 20X1 (3 marks) X made inventory sales of $1,500,000 to Z during 20X1. The original cost of this inventory to X was $1,200,000. Z has all of this inventory on hand at 31 December 20X1 and was sold during 20X2. 2. Sale of inventory from X to Z during 20X2 (5 marks) X made inventory sales of $2,000,000 to Z during 20X2. The original cost of this inventory to X was $1,200,000. Z still has half (50%) of this inventory on hand at 31 December 20X2. 3. Intercompany account (2 marks) The intercompany account between X and Z relating to Z’s unpaid inventory purchases from X is $500,000 as at 31 December 20X2. 4. Intercompany borrowings (3 marks) Y borrowed $1,000,000 from X on 1 January 20X1 repayable in full on 31 December 20X5. Interest on the borrowings is paid at the end of each calendar year at the rate of 8% p.a. 5. Management fee (2 marks) X charges Y an annual management fee of $50,000 that is paid on 1 January each year. 6. Dividends (3 marks) Z declared and paid dividends of $200,000 to its shareholders on 1 October 20X2. Y declared and authorised dividends of $300,000 to its shareholders on 1 December 20X1 that were paid on 28 February 20X2. X only recognises dividends from Y when received in cash. 7. Transfer of land (2 marks) X transferred land to Z on 1 July 20X0 for a cash consideration of $500,000. The land had been recorded in X’s books at $150,000.
- One '11
- Financial Accounting, Generally Accepted Accounting Principles, Z Ltd