Module 27: Consolidation (Intercompany Transactions And Balances)

Question 1

Inter company balances - cash in transit double entry

Answer 1

Cancel balances

DR Trade Payables
CR Trade Receivables

Question 2

Inter company dividends double entry

Answer 2

DR SPL - Finance income (group %)
DR SFP - NCI (NCI %)
CR Retained earnings (100%)

Question 3

Inter-company sales double entry

Answer 3

Eliminate interco sales
DR SPL - Revenue
CR SPL - Cost of Sales

Question 4

Eliminate unrealised profit in inventory steps

Answer 4

Step 1) Calculate total inter company profit 
Step 2) Calculate unrealised profit
Step 3) Adjust:
DR SPL - Cost of sales
CR Inventories 
Step 4) If NCI is seller, allocate part of adjustment 
DR SFP - NCI 
CR SPL - NCI

Question 5

Inter company management fees

Answer 5

Eliminate
DR SPL - Income
CR SPL - Expense

Question 6

Inter company transfer of non-current assets - Step 1

Answer 6

DR SPL - Profit on sale
CR PPE - Cost
CR PPE - Accumulated depreciation

Question 7

Inter company transfer of non-current assets - Step 2

Answer 7

Adjust for post-transfer period
DR PPE - Accumulated depreciation
CR SPL - Depreciation charge
To reverse post-transfer increase in depreciation

Question 8

Inter company transfer of non-current assets - NCI

Answer 8

Allocate proportion of gain on sale/ gain on depreciation to NCI subsidiary depending on whether they are seller or buyer

Question 9

Inventory - Margin

Answer 9

Sales = 100%

Question 10

Inventory - Mark up

Answer 10

COS = 100%