Question

On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450,000 when its’ carrying value in Liala Ltd book was $600,000 (costs $900,000, accumulated depreciation $300,000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent.
Required:
Pass the necessary entries on 30 June 2017 and 30 June 2018 to eliminate the intra-group transfer of equipment.

Answer 1

June'17
Equipment	150000
To loss on sale of assets		150000
(eliminate loss/gain on sale of assets)
Depreciation expense	30000
To accumulated depreciation		30000
(differential depreciation expense)
Deferred tax asset	9000
To Income tax expense		9000
(tax effect on depreciation)
June'18
Depreciation expense	30000
To accumulated depreciation		30000
(differential depreciation expense)
Deferred tax asset	9000
To Income tax expense		9000
(tax effect on depreciation)