Reference no: EM133445521

Question: Jenny Jones is the assistant accountant for the Anzac Ltd corporate group. Jenny has recorded the following entries in the consolidation worksheet for the year ended 30 June 2023, using a tax rate of 30%:

Transaction 1:

Anzac Ltd sold plant to its subsidiary company on 1 July 2022 for $100000. This plant had a carrying amount of $35000. The subsidiary plans to use this plant as an item of inventory. This plant was depreciated by Anzac Ltd at a rate of 10% on cost.

Consolidation entry 30 June 2023:

Account name Debit ($) Credit ($)

Sales $100000 (Debit)

Cost of goods sold expense $35000 (Credit)

Plant $65000 (Credit)

Deferred Tax Asset (DTA) $19500 (Debit)

Income tax expense (ITE) $19500 (Credit)

Accumulated Depreciation $6500 (Debit)

Depreciation expense $6500 (Credit)

Transaction 2:

Anzac Ltd sold inventory for $10000 to its subsidiary on 30 April 2023. Anzac Ltd had paid $8000 for this inventory. On 30 June 2023 the subsidiary company undertook a stocktake which reported 100% of this inventory had been sold to external parties for $122000.

Consolidation entry 30 June 2023:

Account name Debit ($) Credit ($)

Sales $10000 (Debit)

Cost of goods sold expense $8000 (Credit)

Inventory $2000 (Credit)

Deferred Tax Asset (DTA) $600 (Debit)

Income tax expense (ITE) $600 (Credit)

Required: As the group accountant of Anzac Ltd, you are required to review Jenny's worksheet entries. Apply appropriate referencing and technical knowledge to address the following:

(a) For each transaction above, identify all errors or omissions by Jenny and explain the reason why the entry is incorrect in accordance with the relevant Australian (International) accounting standards.

(b) In your discussion, provide all the correct consolidation worksheet entries required for each of the above transactions for the Anzac Ltd group, as at 30 June 2023. Explain which account and amount will be debited and credited. Include any tax effects in your discussion.