Topic 12 - Intra Group Transactions - Illustrative Examples PDF

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Topic 12 – Accounting for Intra-Group Transactions

Exercise 1

Intra Group Dividends

During the year, Subsidiary:  Paid an interim dividend of $10,000 on 30 June; and  Declared a final dividend of $5,000 on 31 December

Required Prepare a b c

Original journal entries in the subsidiary’s books Original journal entries in the parent’s books Elimination entries for the consolidation worksheet

Exercise 2

Intra-Group Sales (no unrealised profit)

During the year, Subsidiary sells inventory to Parent for $20,000 (inventory was acquired for $12,000 last year)  Parent sells all the inventory to an external customer for $30,000  Parent hasn’t paid subsidiary

Required Prepare a b c

Original journal entries in the subsidiary’s books Original journal entries in the parent’s books Elimination entries for the consolidation worksheet

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Exercise 3

Intra-Group Sales (unrealised profit)

Refer to Exercise 2, with the following changes.  Inventory remains with the parent at the end of the year

Required Prepare a b c

Original journal entries in the subsidiary’s books Original journal entries in the parent’s books Elimination entries for the consolidation worksheet

Exercise 4

Intra-group Sales (partly unrealised profit)

Refer to Exercise 2 with the following changes  Parent sells ¾ of the inventory to an external customer for $22,500

Required Prepare a b c

Original journal entries in the subsidiary’s books Original journal entries in the parent’s books Elimination entries for the consolidation worksheet

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Exercise 5

Unrealised Profit in Opening Inventory

Refer to Exercise 4.

Required Prepare elimination entries at the start of the next period

Exercise 6

Intra-group Sale of Non-current Assets (Gain)

On 1 January, Subsidiary sells a machine to Parent for $50,000 (it was acquired for $40,000 on 1 January last year)  Subsidiary has depreciated the machine by $10,000  The machine has a remaining useful life of 4 years.

Required a b c

Calculate the gain/loss on disposal in the subsidiary’s books Calculate the depreciation in the parent’s books Prepare elimination entries

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Exercise 7

Intra-group Sale of Non-current Assets (Loss)

On 1 January, Parent sells equipment to Subsidiary for $60,000 (it was acquired for $100,000 on 1 January last year)  Parent has depreciated the machine by $20,000  The machine has a remaining useful life of 5 years

Required Prepare a b c

Calculate the gain/loss on disposal in the parent’s books Calculate the depreciation in the subsidiary’s books Prepare elimination entries

Exercise 8

Intra-group Sale of Non-current Asset in prior period

Refer to Exercise 7.

Required Prepare relevant elimination entries at the end of the next period.

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