Reference no: EM132907488

Schooner Ltd is a 100% owned subsidiary of Sails Ltd. the rate of company income tax is 30%. During the year ended 30 June 2020 the accounts revealed:

1) Schooner Ltd paid management fees of $25,000 to Sails Ltd.
2) Sails Ltd sold inventory for $ 18 000 to parties external to the group. Schooner Ltd had previously sold this inventory to Sails Ltd for $14,000. The inventory had cost Schooner Ltd $10,000.
3) Sails Ltd sold inventory to Schooner Ltd for $40000. This inventory had cost Sails Ltd $20,000. Schooner ltd sold three-quarters of this inventory to parties external to the group.
4) On 1 July 2019 schooner Ltd sold machinery to Sails Ltd for $200,000, The machinery was originally purchased by Schooner Ltd on 1 July 2014. the carrying amount of the machinery at the time of sale was $150, 000 (cost $ 400000, accumulated depreciation $ 250, 000). The machinery is assessed as having a remaining useful life of 5 years from the date of sale. Straight-lime depreciation is used.

Required:

Problem A) Prepare the consolidation elimination journal entries required for the above intra-group transaction Narrations are not required. (Show ALL working and calculations.)