On 1 July 2018, River Ltd acquired 90% of the share capital to gain control of Creek Ltd. The following intra-group transactions occurred during the year ending 30 June 2019.
- During the 2018 – 2019 period, River Ltd sold inventory to Creek Ltd for $2,000,000. River Ltd purchased this inventory for $1,700,000. By 30 June 2019, Creek Ltd has 30% of that inventory still on hand as unsold.
- Creek Ltd declared a final dividend of $1,500,000 from current year’s profits.
- Creek Ltd paid Water River Ltd, a consultancy fee of $70,000 during the year.
- River Ltd provided a loan of $10,000,000 to Creek Ltd. The loan charges 5% interest
One half of the interest for the current year remains unpaid as at
30 June 2019.
- Creek Ltd sold land to River Ltd for $1,350,000. The land was purchased by Creek Ltd for $600,000.
Prepare the journal entries required to eliminate the intra-group transactions noted above.
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