Intragroup Transaction - Equipment Sold As Equipment

Question 1

What is the pro forma journal for adjustment to ensure that the consolidated retained earning at the beginning of the year is in agreement to that of the end of previous year?

Answer 1

Dr Retained earnings - beginning of year (S)(SCE)
Dr Deferred tax (SFP)
Dr Accumulated depreciation (P)(SFP)
Cr Equipment (P)(SFP)

Question 2

What is the pro forma journal for realization of unrealized profit included in the equipment of buyer as result of depreciation?

Answer 2

Dr Accumulated depreciation (P)(SFP)

Cr Other expenses /depreciation (S)(P/L)

Question 3

What is the pro forma journal for the tax implication of realization of unrealized profit included in the equipment as a result of depreciation?

Answer 3

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

Cr Deferred tax (SFP)

Question 4

What is the pro forma journal entry for elimination of unrealized gain included in the equipment of buyer?

Answer 4

Dr    Other income /gain on sale of asset (S)(P/L)
        Cr    Equipment (P)(SFP)

Question 5

What is the pro forma journal for the tax implication of elimination of unrealized profit in equipment?

Answer 5

Dr Deferred tax (SFP)

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

Question 6

What is the pro forma journal for realization of unrealized profit in the equipment as a result of depreciation?

Answer 6

Dr Accumulated depreciation (P)(SFP)

Cr Other expenses / depreciation (S)(P/L)

Question 7

What is the pro forma journal for the tax implication of realization of unrealized profit included in equipment as a result of depreciation?

Answer 7

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

Cr Deferred tax (SFP)