Question

1. Parent Ltd(P) and Sub Ltd(S) are a consolidated group for financial accounting purpose. Ignore GST in this question. Both companies use the perpetual inventory system.

On the first day of the current year P bought $10,000 worth of inventory on credit. A few months later it sold $1000 of this inventory to S for $3000 on credit.

By the end of the current year, S had sold 90% of this inventory to an outsider for $2100.

Select the correct journal entry for the consolidation worksheet at the end of the current year. By the end of the year, S still had not paid the amount owned to P.

2. Parent Ltd(P) and Sub Ltd(S) are a consolidated group for financial accounting purpose. Ignore GST in this question. Both companies use the perpetual inventory system.

On the first day of the previous year P bought $10,000 worth of inventory on credit. A few months later it sold $1000 of this inventory to S for $3000 on credit.

By the end of the current year, S had sold 90% of this inventory to an outsider for $2100.

Select the correct journal entry for the consolidation worksheet at the end of the current year. By the end of the year, S had sold all of the inventory it had purchased from P. and paid off its debt.

3. Parent Ltd(P) and Sub Ltd(S) are a consolidated group for financial accounting purpose. Ignore GST in this question. Both companies use the perpetual inventory system.

On the first day of the current year P bought $10,000 worth of inventory on credit. A few months later it sold $1000 of this inventory to S for $300 on credit.

By the end of the current year, S had sold 90% of this inventory to an outsider for $2100.

Select the correct journal entry for the consolidation worksheet at the end of the current year. By the end of the year, S still had not paid the amount owned to P.

4. On 1 July 2018, Xavier Ltd rents a warehouse for one year its subsidiary. Gabrielle Ltd, for $60000. The company tax rate is 30%. The consolidation adjustment entry needed at 30 June 2020 is:

Answer 1

	In the books of P
1	Inventory A/c-------------Dr               To Accounts payable (being inventory purchased on credit)	10000	10000
2	COGS A/c-----------------Dr.                To, Inventory A/c (Being inventory sold having cost of 1000)	1000	1000
	In The books of S Ltd
1	Inventory A/c---------------------Dr.                To P Ltd. (Being inventory purchased from Pltd on credit)	3000	3000
2	Accounts receivable A/c---------Dr                           To sales A/c (beinf inventory sold on credit)	2100	2100
3	COGS A/c---------------------Dr.                      To Inventory A/c (Being cost of inventory sold 3000*90%)	2700	2700
	Consolidated worksheet
	Sales A/c------------------dr.                  To Inventory A/c                   To COGS A/c (Being Inventory sold costing 1000 by P ltd , with profit of 2000 , 90% of which is sold and inventory remaining is 2000*10%=200)	3000	200 2800
	P Ltd -------------------Dr                          to S Ltd Being inter co transaction writen off)	3000	3000

2 and 3 are the same questions

solution 4

As at 30th June 2020 the rent expense for subsidiary is $60000 and rent income for parent is $60000 without taxes.

Rent net of taxes= $60000- 30% of $ 60000= $420000

Consolidation entry would be

P Ltd A/c------------Dr. $ 420,000

                    To, S Ltd A/c $ 420,000