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Unformatted text preview: Use the information below to answer questions 31 to 35 The X LTD Group was established on 1 January 20X0 as follows: 80% 60% X LTD Z LTD Y LTD Consolidation worksheet entries are being prepared for the year to 31 December 20X2 Details about intra-group transactions and balances for the year are set out below. The corporate income tax rate is 30% x During 20X2, X made inventory sales to Y amounting to $2,000,000. The original cost of this inventory to X was $1,400,000. Y still has half (50%) of this inventory on hand at 31 December 20X2. x On 1 January 20X1, Y borrowed $1,000,000 from X 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. x On 1 March 20X2, Y declared and paid dividends of $200,000 to its shareholders out of profits for the year to 31 December 20X1. x X transferred plant to Z on 1 January 20X2 for a cash consideration of $900,000. At the date of the transfer, the plant had a carrying amount to X of $600,000 (cost $800,000 and accumulated depreciation $200,000). The remaining useful life of the plant at 1 January 20X2 is three years. 1) The worksheet entries for intragroup inventory sales and unrealised profit in closing inventory are: a) DR. Sales $1,600,000 CR. Cost of sales $1,360,000 CR. Inventory $ 240,000 DR. Deferred tax asset $ 72,000 CR. Income tax expense $ 72,000 b) DR. Sales $2,000,000 CR. Cost of sales $1,700,000 CR. Inventory $...
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- One '11
- Depreciation, Generally Accepted Accounting Principles, Deferred tax asset