Question

On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). 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

Date	Account Titles and Explanation	Debit	Credit
July 1, 2016	Depreciation expense	$300,000
	Accumulated depreciation - Equipment		$300,000
	(To record the depreciation expense)
July 1, 2016	Cash	$450,000
	Accumulated depreciation - Equipment	$300,000
	Loss on sale of Equipment	$150,000
	Equipment		$900,000
	(To record the sale of Equipment)
July 1, 2016	Equipment	$150,000
	Loss on sale of Equipment		$150,000
	(To record the loss on sale of Equipment)