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

Answer
Journal Entry
Date	Particulars	Debit	Credit
1.Jul.16	Jordan Ltd account	$        4,50,000
	Accumulated depreciation account	$        3,00,000
	Statement of profit and loss account (Net loss on transfer of asset)	$        1,05,000
	Deferred tax aaset account (Loss on sale *30%)	$           45,000
	To Plant (Cost) Account		$        9,00,000
Date	Particulars	Debit	Credit
1.Jul.16	Plant account	$        4,50,000	-
	To Liala Ltd		$        4,50,000
30.Jun.17	Depreciation expenses on plant ($450,000/5yr)	$           90,000	-
	To Accumulated depreciation - Plant account	-	$           90,000
Consolidated books of accounts
Date	Particulars	Debit	Credit
30.Jun.17	Plant	$           12,000	-
	To Deferred Liability asset amount		$           36,000
	(Unrealized loss on sale *30%)
	To Statement of profit and loss account		$           87,000
	(Net unrealized loss on the transfer of asset)
Consolidated books of accounts
Date	Particulars	Debit	Credit
30.Jun.17	Plant	$           90,000
	To Deferred Liability asset account		$           27,000
	(Unrealized loss on sale *30%)
	To Statement of profit and loss account		$           63,000
	(Net unrealized loss on transfer of asset)

Working Note :
Calculation of unrealized profit on plant
Year	Carrying value of plant in Liala	Carrying value of plant in Jordan Ltd	Unrealized Loss	Deferred tax Liability
30.Jun.17	$                                                           4,80,000	$        3,60,000	$       -1,20,000	$      36,000
30.Jun.18	$                                                           3,60,000	$           27,000	$          -90,000	$      27,000