NCI Intra-group transactions.
Frank Ltd had acquired 70% of Barry Ltd, on 1/07/2016.
A. On 10 April 2019, Barry Ltd sold equipment to Frank Ltd for $50 000. At the time of the sale, the equipment had a carrying amount of $46 875 in the books of Barry Ltd. Winnaleah Wines had purchased the equipment on 30 June 2015 for $75 000 and depreciated it at 10% straight-line on cost with no residual value. Frank Ltd uses the same method of depreciation.
B. On 16 June 2019 Barry Ltd purchased inventory from Frank Ltd for $35 000. This inventory had previously cost Wayward Whisky $25 000. Barry Ltd had not paid Wayward Whisky Ltd for these goods as at 30 June 2019, and had already sold 18% to external parties. Barry Ltd paid the account payable on 9 July 2019 and sold the remainder of the goods to external parties by 30 June 2020 for a total profit of $15 000.
Required:
Prepare the journal entries and calculations required for these intra-group transactions.
JOURNAL ENTRIES IN THE BOOKS OF BARRY LIMITED ON PURCHASE & SALE OF EQUIPMENT TO FRANK LIMITED
1. ON 30TH JUNE, 2015
EQUIPMENT A/C..............Dr. 75000
To Bank/Cash A/c 75000
(Being equipment purchased on 30th June, 2015)
2. on 31st DECEMBER, 2015
Depreciation A/c .........................Dr. 3750
To Equipment A/c 3750
(being Depreciation for the Period July-December,15)
(75000*10%*6/12)
3. on 31st December, 2016
Depreciation A/c .......................Dr. 7500
To Equipment A/c 7500
(Being Depreciation for the Period 1st Jan 16 to 31st December, 2016)
(75000*10%)
4. On 31st December, 2017
Depreciation A/c .......................Dr. 7500
To Equipment A/c 7500
(Being Depreciation for the Period 1st Jan 17 to 31st December, 2017)
(75000*10%)
5. On 31st December, 2018
Depreciation A/c .......................Dr. 7500
To Equipment A/c 7500
(Being Depreciation for the Period 1st Jan 18 to 31st December, 2018)
(75000*10%)
6. On 10th April, 2019
Depreciation A/c..........................Dr. 1875
To Equipment A/c 1875
(being Dep[reciation for January, 2019 to March, 2019 i e; 3Months)
Written Down Value on 10th Apruil, 2019
Purchase Price 30/06/2015 (6months) 75000
Less: Depreciation for 2015 (3750)
Less: Depreciation for 2016 (7500)
Less: Depreciation for 2017 (7500)
Less: Depreciation for 2018 (7500)
Less: Depreciation for 2019 (3 Months) (1875)
46875
JOURNAL ENTRY AT THE TIME OF SALE OF EQUIPMENT
Frank Ltd A/c .........................................Dr. 50000
To Equipment A/c 46875
To Profit on Sale of Equipment A/c 3125
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