Intragroup Transaction - Equipment Sold As Inventory

Question 1

What is the pro forma journal entry 1 adjustment to ensure that the consolidated retained earnings at the beginning of the year is in agreement with the end previous year?

Answer 1

Dr Retained earnings - beginning of year (S)(SCE)
Dr Deferred tax (SFP)
Cr Other income / gain on sale of equip (S)(P/L)

Question 2

What is pro forma journal entry 2 the tax implication of realization of unrealized profit included in the opening inventory of buyer?

Answer 2

Dr Income tax expense (S)(P/L)

Cr Deferred tax (SFP)

Question 3

What is the pro forma journal 3 of eliminating unrealized profit included in the closing inventory of buyer?

Answer 3

Dr    Other income / gain on sale of equip (S)(P/L)
        Cr    Inventory (P)(SFP)

Question 4

What is the pro forma journal 4 of the tax implication of elimination of unrealized profit in closing inventory?

Answer 4

Dr Deferred tax (SFP)

Cr Income tax expense (S)(P/L)