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. (provide the dates)

Answer 1

ANSWER

	Journal EntrieS
	Liala Ltd
Date	Particulars	Debit	Credit
1.07.2016	Accounts Receivable (Jordan Ltd)	$450,000
	Accumulated depreciation	$300,000
	Loss on sale of plant(After tax)	$105,000
	Deferred tax asset ($150,000* 30%)	$45,000
	Plant (Cost)		$900,000
	(Being Plant sold as per cost model)
	Jordan Ltd
Date	Particulars	Debit	Credit
1.07.2016	Plant	$450,000
	Accounts Payable (Liala Ltd)		$450,000
	(Being plant purchased from Liala Ltd)
30.06.2017	Depreciation Expense ($450,000/5)	$90,000
	Accumulated Depreciation		$90,000
	(Being Depreciation charged)
	Consolidation entries
Date	Particulars	Debit	Credit
30.06.2017	Plant	$120,000
	Deferred tax liability (30% of 120,000)		$36,000
	Unrealized loss on transfer of asset (after tax)		$84,000
	(Being entry for intra group transfer)
30.06.2018	Plant	$90,000
	Deferred tax liability (30% of 90,000)		$27,000
	Unrealized loss on transfer of asset (after tax)		$63,000
	(Being entry for intra group transfer)

Working
calculation of unrealized loss on plant
Year	Carrying value	Carrying value	Unrealized loss	Deferred tax
	of plant in Liala	of plant in Jordan	Liability
30.06.2017	$480,000	$360,000	$120,000	$36,000
30.06.2018	$360,000	$270,000	$90,000	$27,000

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