Reference no: EM131987721

Question - You are currently preparing the consolidated financial statements for your client Shiraz Ltd. Shiraz owns all the share capital of Riesling Ltd. The following intra-group transactions have occurred during the financial year ended 30 June 2013:

(a) During the year ended 30 June 2013, Riesling Ltd sold $50,000 worth of inventory to Shiraz Ltd. Riesling Ltd recorded a 310,000 profit before tax on these transactions. At 30 June 2013, Shiraz Ltd has one-quarter of these goods still on hand.

(b) During the 2012-13 period, Shiraz Ltd sold inventory costing $12,000 to Riesling Ltd for $18,000. One-third of this was sold to Olivia Ltd for $9,500 and one-third to Taylah Ltd for $9,000.

(c) On 1 January 2012, Riesling Ltd sold inventory costing $6,000 to Shiraz Ltd at a transfer price of 38,000. On 1 September 2012, Shiraz Ltd sold half these goods back to Riesling Ltd, receiving $3,000 from Riesling Ltd. Of the remainder kept by Shiraz Ltd, half was sold in January 2013 to Anna Ltd at a loss of $200.

(d) On 25 June 2013, Shiraz Ltd declared a dividend of $10,000. On the same day, Riesling Ltd declared a $5,000 dividend.

(e) On 1 October 2012, Shiraz Ltd issued 1,00015% debentures of $100 at nominal value. Riesling Ltd acquired 400 of these. Interest is payable half-yearly on 31 March and 30 September. Accruals have been recognised in the legal entities' accounts.

(f) During the 2011-12 period, Shiraz Ltd sold inventory to Riesling Ltd for 310,000, recording a before-tax profit of $2,000. Half this inventory was unsold by Riesling Ltd at 30 June 2012.

Required: Prepare adjusting journal entries for the consolidation worksheet at 30 June 2013. Assume an income tax rate of 30% and that all income on sale of assets is taxable and expenses are deductible. Provide a narration for each adjustment.