[QUESTION 10] 5 marks
Belgium Ltd owns all the issued capital of Chocolate Ltd. During the period ended 30 June 2005 Belgium Ltd sold Chocolate Ltd inventory that had a cost of $200,000 for $270,000. At the end of the current period Chocolate Ltd had 75 per cent of that inventory still on hand; the rest was sold to entities external to the group. During the previous period Chocolate Ltd had sold inventory to Belgium Ltd at a profit of $49,000.
At the end of that period (30 June 2004) Belgium Ltd still had 40 per cent of that inventory on hand. That entire inventory was sold to parties external to the group during the current year. The taxation rate is 30 per cent and both companies use a perpetual inventory system.
What consolidation journal entries are requiredStatistic to eliminate the effects of these transactions for the period ended 30 June 2005?
[QUESTION 11] 6 marks
Zeus Ltd owns 100 per cent of the issued capital of Ares Ltd. On 1 July 2005 Zeus Ltd purchased an item of equipment from Ares Ltd for $800,000. Ares had owned the equipment for 2 years. It originally cost $890,000 and the accumulated depreciation was $178,000 at the time of sale. The equipment has been depreciated over this time, but not written down or revalued. The remaining useful life of the equipment at 1 July 2005 is estimated to be 8 years. Zeus Ltd expects the benefits to be obtained from the equipment to be evenly received over its useful life. The tax rate is 30 per cent.
What are the consolidation journal entries required for this inter-company transaction for the period ended 30 June 2006?
[QUESTION 12] 10 marks
Johnson Ltd owns all the share capital of Grace Ltd.
. (a) On 1 January 2008, Grace Ltd sold a new tractor to Johnson Ltd for $20,000. This 
had cost Grace Ltd $16,000 on that day. Johnson used the tractor as a non- 
current asset, and charged depreciation at the rate of 10% p.a.
. (b) A non-current asset with a carrying amount of $1,000 was sold by Johnson Ltd to Grace Ltd for $800 on 1/1/2010. Grace Ltd intended to use this item as inventory, being a seller of second-hand goods. Both entities charged depreciation at the rate of 10% p.a. on non-current assets. The item was still on 
hand at 30 June 2010.
. (c) During March 2010, Grace Ltd declared $3,000 dividend and paid it in August 
2010.
. (d) Grace Ltd rented a spare warehouse to Johnson Ltd. The total rent charged and 
paid was $30,000.
For each of the above intra-group transactions, assume that the consolidation process is
being undertaken at 30 June 2010, and that an income tax rate of 30% applies. Prepare the consolidation adjustment entries for these transactions.
[QUESTION 13] 10 marks
Zeus Ltd owns 100 per cent of the issued capital of Ares Ltd. On 1 July 2005 Zeus Ltd purchased an item of equipment from Ares Ltd for $800,000. Ares had owned the equipment for 2 years. It originally cost $890,000 and the accumulated depreciation was $178,000 at the time of sale. The equipment has been depreciated over this time, but not written down or revalued. The remaining useful life of the equipment at 1 July 2005 is estimated to be 8 years. Zeus Ltd expects the benefits to be obtained from the equipment to be evenly received over its useful life. The tax rate is 30 per cent.

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What are the consolidation journal entries required for this inter-company transaction for the period ended 30 June 2007?
[QUESTION 14] 10 marks
Melbourne Ltd purchased 100 per cent of the issued capital of Perth Ltd for a cash consideration of $3.8 million on 1 July 20 x 1. At that time the book value of the net assets of Perth Ltd were represented by:
Share capital $2,700,000 Retained earnings 300,000 $3,000,000
The fair value of the Land continuously held by Perth Ltd should be $500,000 more than book value.
During the period ended 30 June 20×3 Perth Ltd sold inventory that cost $190,000 for $300,000 to Melbourne Ltd. 60% of this inventory remains on hand in Melbourne Ltd at the end of that year. On 30 June 20×4, 20% of this inventory (book value of $60,000) remains on hand in Melbourne Ltd. Both companies use a perpetual inventory system. The taxation rate is 30 per cent.
What consolidation journal entries are required for the period ending 30 June 20 x 4?
[QUESTION 15] 10 marks
On 1 July 2005 Harry Ltd purchased 80 per cent of the issued share capital of Wills Ltd and has control of Wills. The fair value of the net assets of Wills Ltd on that date was represented as follows:
Share capital $2,000,000
Retained earnings 500,000 $2,500,000
Harry Ltd paid cash consideration of $2,500,000 for Wills. Wills Ltd made an operating profit of $350,000, there were no intragroup transactions during the period ended 30 June 2006. Goodwill had been determined to have been impaired during the year by $25,000. What consolidation journal entries are required for the period and what is the minority interest in equity as at 30 June 2006?
[QUESTION 16] 10 marks
Apple Ltd owns all the issued capital of Pear Ltd. On 1 July 2004 Pear Ltd purchased an item of plant from Apple Ltd for $1,000,000. Apple Ltd had owned the plant for 5 years. It originally cost $1,350,000 and the accumulated depreciation at 1 July 2004 is $562,500. The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years. The pattern of benefits is expected to be obtained from the equipment evenly over its useful life. The tax rate is 30 per cent. Round all calculations to the nearest dollar.
What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2006 and 30 June 2007?
[QUESTION 17] 10 marks
Green Ltd purchased 90 per cent of the issued capital and in the process gained control over Maroon Ltd on 1 July 2005. The fair value of the net assets of Maroon Ltd at purchase was represented by:
Share capital $3,220,000 Retained earnings 740,000 $3,960,000

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Green Ltd paid cash consideration of $3,700,000 for Maroon Ltd. During the period ended 30 June 2007, Maroon Ltd paid management fees of $100,000 to Green Ltd and Maroon had an operating profit of $405,000. Maroon Ltd declared a dividend of $98,000 during the period. Green purchased inventory from Maroon during the period ended 30 June 2007 for $100,000. The inventory cost Maroon Ltd $85,000 and at the end of the period Green had 35 per cent of that inventory still on hand. Maroon’s opening retained earnings for the period ended 30 June 2007 was $810,000. Goodwill has been determined to have been impaired by $13,600. Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries. There were no other inter-company transactions. Ignore tax implications.
For the period ended 30 June 2007, what consolidation journal entries are required and what is the outside equity interest?
***** END OF ASSIGNMENT QUESTIONS *****

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