Apple Ltd owns all the issued capital of Pear Ltd.On 1 July 2014,Pear Ltd purchased an item of plant from Apple Ltd for $1 000 000.Apple Ltd had owned the plant for 5 years.It originally cost $1 350 000 and the accumulated depreciation at 1 July 2004 is $562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016?
C) $\text { Period ended } 30 \text { June 2015: }\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & {\text { Gain on sale }} &212500 & \ \hline \mathrm{Cr} & \text { Plant } & &212500 \ \hline & & & \ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \ \hline & & & \ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \ \hline \mathrm{Cr} & \text { Deferred tax asset } & &24107 \ \hline\\hline \end{array}$ $\begin{array}{l} \text { Period ended } 30 \text { June 2016: }\ \begin{array}{|c|l|r|r|} \hline & & & \ \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \ \hline \mathrm{Cr} & \text { Plant } & & 148750 \ \hline & & & \ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \ \hline & & & \ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \ \hline \end{array} \end{array}$

Question

Quizplus · Accepted Answer

The Answer of Apple Ltd owns all the issued capital of Pear Ltd.On 1 July 2014,Pear Ltd purchased an item of plant from Apple Ltd for $1 000 000.Apple Ltd had owned the plant for 5 years.It originally cost $1 350 000 and the accumulated depreciation at 1 July 2004 is $562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016?
C) $\text { Period ended } 30 \text { June 2015: }\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & {\text { Gain on sale }} &212500 & \ \hline \mathrm{Cr} & \text { Plant } & &212500 \ \hline & & & \ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \ \hline & & & \ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \ \hline \mathrm{Cr} & \text { Deferred tax asset } & &24107 \ \hline\\hline \end{array}$ $\begin{array}{l} \text { Period ended } 30 \text { June 2016: }\ \begin{array}{|c|l|r|r|} \hline & & & \ \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \ \hline \mathrm{Cr} & \text { Plant } & & 148750 \ \hline & & & \ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \ \hline & & & \ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \ \hline \end{array} \end{array}$

Apple Ltd Owns All the Issued Capital of Pear Ltd