Belleview ltd is the parent company holding 80 percent interest in the James Hardy ltd. For each of the following independent cases, provide adjusting entries necessary to eliminate the effect of intragroup transaction at 30 June 2016:
During the period James Hardy Ltd sold inventory to Belleview Ltd at a price of $40000. The cost of the inventory to James Hardy ltd was $28000. Sixty percent of the inventory is still on hand of Belleview Ltd at the end of the period.
During the period, James Hardy paid consultancy fees to Belleview Ltd amounting to $ 40000
During the period, Belleview Ltd borrowed $200000 from James Hardy Ltd which is still unpaid by the end of the period. During the period Belleview Ltd has paid $20000 interest to James Hardy Ltd for the borrowing.
One year ago, at 1 July 2015, James Hardy Ltd sold an equipment to Belleview Ltd for a price of $90000. At the time of the sale, the carrying value of the equipment in the James Hardy Ltd’s account was $50000 and the accumulated depreciation was $50000. Belleview is depreciating the equipment over a further 10 years period. The expected salvage value is zero.
Assume a corporate tax rate of 30 percent.