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Topic 12 - Intra Group Transactions - Illustrative Examples

The document discusses accounting for various intra-group transactions in consolidation, including intra-group dividends, sales of inventory and non-current assets where realized and unrealized profits may occur. It provides 8 exercises that require preparing original journal entries in subsidiary and parent books, and consolidation elimination entries for intra-group dividends, inventory sales, asset sales that result in gains or losses, and cases where unrealized profits affect opening inventory or a prior period asset sale.

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Miss Slayer
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59 views

Topic 12 - Intra Group Transactions - Illustrative Examples

The document discusses accounting for various intra-group transactions in consolidation, including intra-group dividends, sales of inventory and non-current assets where realized and unrealized profits may occur. It provides 8 exercises that require preparing original journal entries in subsidiary and parent books, and consolidation elimination entries for intra-group dividends, inventory sales, asset sales that result in gains or losses, and cases where unrealized profits affect opening inventory or a prior period asset sale.

Uploaded by

Miss Slayer
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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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 Original journal entries in the subsidiary’s books


b Original journal entries in the parent’s books
c 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 Original journal entries in the subsidiary’s books


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

Page 1 of 4
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 Original journal entries in the subsidiary’s books


b Original journal entries in the parent’s books
c 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 Original journal entries in the subsidiary’s books


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

Page 2 of 4
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 Calculate the gain/loss on disposal in the subsidiary’s books


b Calculate the depreciation in the parent’s books
c Prepare elimination entries

Page 3 of 4
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 Calculate the gain/loss on disposal in the parent’s books


b Calculate the depreciation in the subsidiary’s books
c 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.

Page 4 of 4

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