Prepare all intercompany adjusting journal entries

On 1 July 2020 Robyn Ltd acquired all the issued shares in David Ltd and so has to consolidate its accounts with those of David Ltd . During the year ended 30 June 2021 it had various transactions with David Ltd which are outlined below .Both companies pay tax at 30%.

(a)During the year Robyn Ltd sold inventory costing $64,000 at a markup of 25% to David Ltd. At balance date David Ltd had one quarter of this inventory still on hand

(b) At the end of the reporting period David Ltd owes Robyn Ltd $13,500 for services provided on credit.

(c) Robyn Ltd rented an office during the year from David for $45,000.Robyn paid this during the year

(d) David Ltd issued $150,000 4% debentures . On 30 September 2020 it issued $85,000 of these debentures to Robyn .The debentures pay interest twice per year on 1 April and 1 October.

( e) Robyn Ltd sold a piece of Machinery costing $90,000 with a useful life of 6 years for $78,000 on 1 July 2020 to David Ltd. Robyn had originally purchased the machine on 1 July 2019 .The machine was being depreciated on a straight line basis with no expected scrap value ,for the remainder of its useful life which was 5 years at the date of sale .The useful life is unchanged on sale .(f) Robyn Ltd paid an interim dividend of $16,000 in March 2021 and David Ltd paid an interim dividend of $8,500 in March 2021 .At 30 June 2021 Robyn has proposed a final dividend of $22,000 and David has a proposed final dividend of $10,500 .
Required: Showing each part separately Prepare all intercompany adjusting journal entries for the above intercompany transactions for the year ended 30 June 2021

Solution:

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