Question

Vixen Ltd owns all the share capital of Post Ltd and the income tax rate is 30%.

_ In February 2020, Post Ltd sold inventories to Vixen Ltd for $12 000, at a mark-up of 50% on cost. One-third of this inventory were unsold by Vixen Ltd at 30 June 2020, the rest were sold to external entities.

_ In December 2019, Vixen Ltd paid a $1500 interim dividend.

Required In relation to the above intragroup transactions prepare the appropriate general journal entries for the consolidation worksheet at 30 June 2020.

Answer 1

The Unrealised Profit on Unsold inventory:
(12000 - 8000) * (1/3) = 1333.33
Intra-group elimination entries:
Date	Acc titles	Debit $	Credit $
30-Jun-20	Sales revenue	12000
	COGS		10666.67
	Inventory		1333.33
	(elimination of the unrealised profit on Inventory)
30-Jun-20	Deferred Tax Asset	400		(1333.33*30%)
	Income Tax expense		400
	(Adjustment of tax on unrealised profits)
30-Jun-20	Dividend revenue	1500
	Dividend expense		1500
	(to eliminate the intra-group dividend by Vixen)
30-Jun-20	Deferred Tax Asset	450		(1500*30%)
	Income Tax expense		450
	(Adjustment of tax on intra-group dividend)