Apple Plc Owns All the Issued Capital of Pear Plc

question 35

Multiple Choice

Apple Plc owns all the issued capital of Pear Plc.On 1 July 2014,Pear Plc purchased an item of plant from Apple Plc for £1 000 000.Apple Plc had owned the plant for 5 years.It originally cost £1 350 000 and the accumulated depreciation at 1 July 2004 is £562 500.The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years.The pattern of benefits is expected to be obtained from the equipment evenly over its useful life.The tax rate is 30%.Round all calculations to the nearest dollar. What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2015 and 30 June 2016?

• A) \(\begin{array}{|l|l|r|l|} \hline {\text { Period ended } 30 \text { June 2015: }} & & \\ \hline & & \\ \hline \mathrm{Dr} & \text { Gain on sale } & 212500 & \\ \hline \mathrm{Cr} & \text { Plant } & & 212500 \\ \hline & & \\ \hline \mathrm{Dr} & \text { Deferred tax asset } & 63750& \\ \hline \mathrm{Cr} & \text { Income tax expense } & & 63750 \\ \hline\\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 30357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 30357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 9107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 9107 \\ \hline\\ \hline \text { Period ended 30 June } 2016& & & \\ \hline\\ \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\ \hline \mathrm{Dr} & \text { Plant } & 350000 & \\ \hline \mathrm{Cr} & \text { Accumulated depreciation - plant } & & 498750 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 70339 & \\ \hline \mathrm{Cr} & \text { Opening retained earnings } & & 39982 \\ \hline \mathrm{Cr} & \text { Depreciation expense } & &30357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Opening retained earnings } & & 9107 \\ \hline \mathrm{Dr} & \text { Income tax expense } & & 9107 \\ \hline \end{array}\)
• B) \(\text { Period ended } 30 \text { June } 2015 \text { : }\) \(\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Gain on sale } & 212500 & \\ \hline \mathrm{Dr} & \text { Plant } & 350000 & \\ \hline \mathrm{Cr} & \text { Accumulated depreciation - plant } & & 562500 \\ \hline\\ \hline \mathrm{Dr} & \text { Deferred tax asset } & 63750 & \\ \hline \mathrm{Cr} & \text { Income tax expense } & & 63750 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 30357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 3035 \\ \hline\\ \hline \text { Dr } & \text { Income tax expense } & 9107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 910\\ \hline \end{array}\) \(\text { Period ended } 30 \text { June } 2016 \text { : }\) \(\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\ \hline \mathrm{Dr} & \text { Deferred tax asset } & 63750 & \\ \hline \mathrm{Dr} & \text { Plant } & 350000 & \\ \hline \mathrm{Cr} & \text { Accumulated depreciation - plant } & & 562500 \\ \hline\\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 60714 & \\ \hline \mathrm{Cr} & \text { Opening retained earnings } & & 30357 \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 30357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Opening retained earnings } & 9107 & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 9107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } && 18214 \\ \hline \end{array}\)
• C) \(\begin{array}{|c|l|r|r} \hline \text { Period ended 30 June 2015: } & & \\ \hline \mathrm{Dr} & \text { Gain on sale } & 212500 & \\ \hline \mathrm{Cr} & \text { Plant } & & 212500 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } & 80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline\\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \\ \hline \end{array}\) \(\text { Period ended } 30 \text { June } 2016 \text { : }\) \(\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Opening retained earnings } & 148750 & \\ \hline \mathrm{Cr} & \text { Plant } & & 148750 \\ \hline \mathrm{Dr} & \text { Accumulated depreciation - plant } &80357 & \\ \hline \mathrm{Cr} & \text { Depreciation expense } & & 80357 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Income tax expense } & 24107 & \\ \hline \mathrm{Cr} & \text { Deferred tax asset } & & 24107 \\ \hline \end{array}\)

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Definitions:

Psychoanalysis

A therapeutic approach developed by Freud that aims to explore unconscious conflicts and desires influencing behavior.

Moral Anxiety

Anxiety that arises from internal conflicts between what one wants to do and what one considers to be the right or moral action to take.

Psychoanalytic Theory

A theory developed by Sigmund Freud that emphasizes unconscious processes and childhood experiences as the primary factors in personality development and psychological issues.

Internalized

The process of integrating attitudes, values, or norms into one's own belief system or behavior.