Question

In: Accounting

ABC ltd is the parent company holding 75 percent interest in the XYZ ltd. The following...

ABC ltd is the parent company holding 75 percent interest in the XYZ ltd. The
following are the intragroup transactions for the period ended 30 June 2016:


(i) During the period XYZ Ltd sold inventory to ABC Ltd at a price of
$120000. The cost of the inventory to XYZ ltd was $84000. Forty
percent of the inventory is still on hand of ABC Ltd at the end of the
period.
(ii) During the period, XYZ Ltd paid service fees to ABC Ltd amounting to $
120000 and ABC Ltd paid consultancy fees to XYZ Ltd amounting to
$100000.
(iii) At the end of the year, XYZ declared a dividend amounting to $60000.
ABC Ltd also declared a dividend amounting to $80000.
(iv) One year ago, on 1 July 2015, XYZ Ltd sold an equipment to ABC Ltd
for a price of $360000. At the time of the sale, the carrying value of the
equipment in the XYZ Ltd’s account was $220000 and the accumulated
depreciation was $200000. ABC is depreciating the equipment over a
further 10 years period. The expected salvage value is zero.
Assume a corporate tax rate of 30 percent.
Required:
For each of the above independent cases, provide adjusting entries necessary to
eliminate the effect of the intragroup transaction at 30 June 2016

Solutions

Expert Solution


Related Solutions

ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs...
ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. 10. Required information Based on the information given above, what amount of cost...
Assume that a Parent company acquires a 75% interest in its Subsidiary on January 1, 2016....
Assume that a Parent company acquires a 75% interest in its Subsidiary on January 1, 2016. On the date of acquisition, the fair value of the 75% controlling interest was $1,800,000 and the fair value of the 25% noncontrolling interest was $600,000. On January 1, 2016, the book value of net assets equaled $2,400,000 and the fair value of the identifiable net assets equaled the book value of identifiable net assets (i.e. there was no AAP or Goodwill). The parent...
The following are selected transactions of XYZ Ltd: 12 July   Sold goods on account to ABC...
The following are selected transactions of XYZ Ltd: 12 July   Sold goods on account to ABC Ltd for $2400, terms 3/10, n/30. The cost of the goods sold was $1600. 19 July   Forwarded a credit note for $180 to ABC Ltd covering part of the goods sold on 12 July, which cost $120, that were returned by ABC Ltd as inappropriate. The goods returned were not defective. 21 July   Received from ABC Ltd a cheque in full settlement of the...
The following are selected transactions of XYZ Ltd: 12 July Sold goods on account to ABC...
The following are selected transactions of XYZ Ltd: 12 July Sold goods on account to ABC Ltd for $3750, terms 1/10, n/30. The cost of the goods sold was $2500. 19 July Forwarded a credit note for $300 to ABC Ltd covering part of the goods sold on 12 July, which cost $200, that were returned by ABC Ltd as inappropriate. The goods returned were not defective. 21 July Received from ABC Ltd a cheque in full settlement of the...
Interest Rate Swaps ABC Company and XYZ Company need to raise funds to pay for capital...
Interest Rate Swaps ABC Company and XYZ Company need to raise funds to pay for capital improvements at their manufacturing plants. ABC Company is a well-established firm with an excellent credit rating in the debt market; it can borrow funds either at 11 percent fixed rate or at LIBOR + 1 percent floating rate. XYZ Company is a fledgling start-up firm without a strong credit history. It can borrow funds either at 10 percent fixed rate or at LIBOR +...
On 1 July 2019, XYZ Ltd leased a machinery from ABC Ltd to be used to...
On 1 July 2019, XYZ Ltd leased a machinery from ABC Ltd to be used to be used in the mining operations. The machinery cost XYZ Ltd $120 307, considered to be its fair value on that same day. The capital/finance lease agreement contained the following provisions: The lease term is for 3 years, commencing on 1st July 2019 The lease is cancellable and with a 10 % charge of the leased asset’s fair value from the lessor Annual lease...
Part A On 1 July 2019, XYZ Ltd leased a machinery from ABC Ltd to be...
Part A On 1 July 2019, XYZ Ltd leased a machinery from ABC Ltd to be used to be used in the mining operations. The machinery cost XYZ Ltd $120 307, considered to be its fair value on that same day. The capital/finance lease agreement contained the following provisions: The lease term is for 3 years, commencing on 1st July 2019 The lease is cancellable and with a 10 % charge of the leased asset’s fair value from the lessor...
a) Two firms, ABC Ltd and XYZ Ltd, are identical in every respect apart from their...
a) Two firms, ABC Ltd and XYZ Ltd, are identical in every respect apart from their capital structure. Both will earn $284 million if the market swings upwards and $100 million in a downward swing. There is an even chance of the market swinging upwards or downwards. ABC Ltd has no debt. XYZ Ltd has issued $800 million of its debt at an interest rate of 10% and hence, $80 million of its income is paid out as interest. Assume...
The state average for the TAKS-math scores was 75 percent passing. A parent in Tyler, TX...
The state average for the TAKS-math scores was 75 percent passing. A parent in Tyler, TX claims that students are doing much worse than the state passing rate. The high-school principal in Tyler, TX, summarized her latest TAKS-math scores from the 11th grade. Out of 120 students, 85 got a passing TAKS-math score. Is there evidence at the 5% level to support the parent’s claim? What are the null and alternative hypotheses for this test? a) Ho: p ≥≥ 0.75...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the equity method to account for its investment in subsidiary. On January 1, 2012, the parent company issued to an unaffiliated company $1,000,000 (face value) 10 year, 10 percent bond payable for a $61,000 premium. The bonds pay interest in December 31 of each year. On January 1, 2015, the subsidiary acquired 40 percent of the bonds for $386,000. Both companies use straight-line amortization. In...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT