24 property plant and equipment depreciation and

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Property, plant and equipment Depreciation and realisation of profits: The tax effect adjustment is: Reversing deferred tax asset by the tax rate multiplied by the adjustment to accumulated depreciation. Increasing income tax expense by the tax rate multiplied by the adjustment to current depreciation expense 25
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Property, plant and equipment Depreciation and realisation of profits: Decreasing retained earnings by the tax rate multiplied by the adjustment to prior depreciation expenses. 26
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Property, plant and equipment Depreciation and realisation of profits: Realisation of intragroup profits or losses: Realisation of profits or losses normally occurs when an external entity is involved in the transaction. With depreciable assets, determining when the gain or loss on sale becomes realised to the group is not as simple. 27
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Property, plant and equipment Depreciation and realisation of profits: Realisation of intragroup profits or losses: The depreciable asset normally remains within the group and is used in production rather than being sold to external entities. 28
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Property, plant and equipment Change in classification of transferred assets: It is possible for an item that is transferred within the group to be regarded by the seller as a non-current asset and by the buyer as inventories or vice versa. 29
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Property, plant and equipment Change in classification of transferred assets: In preparing the consolidation adjustment entry for current period intragroup transfer of non-current assets to inventories still on hand at the end of the period, note the following. The adjustment to both gain on sale and inventories is the difference between the intragroup sale price and the carrying amount at the point of sale (i.e. intragroup profit). 30
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Property, plant and equipment Change in classification of transferred assets: The tax effect adjustment is equal to the tax rate multiplied by the intragroup profit and is posted as a debit to deferred tax asset and a credit to income tax expense. 31
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Property, plant and equipment Change in classification of transferred assets: In preparing the consolidation adjustment entries for current period intragroup transfer of inventories to non-current assets still on hand at the end of the period, note the following. The adjustment to sales revenue is the intragroup sale price. The adjustment to cost of sales is the original cost of inventories sold intragroup. 32
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Property, plant and equipment Change in classification of transferred assets: In preparing the consolidation adjustment entries for prior period intragroup transfer of inventories to non-current assets still on hand at the end of the current period, note the following.
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