BUACC5932 week 9 Intragroup transaction pt.2

Hi guys welcome back to view A.

C. C 5932 We are now looking at part two

of the interactive transactions.

So if you have watched apart one that you know

that we are focusing heavily on only one parent and

one subsidiary and they are transacting with each other and

that's what we call intra group transactions.

Now we look at another examples of the transactions that

they might have.

So in the part one just now we did talk

about infantry as the item of transaction and at the

end of the year when they need to prepare consolidated

financial statement, there are still some infant, there are still

all infantry left content.

Now we will then see what will be the more

realistic example or another version of questions that you might

get when the infantry are partly.

So not completely so but partly.

So what will happen now if we bring in an

involvement of a third excellent third party which is an

external party to the group transaction here?

Remember with the integral transaction you only recognize a profit

or loss from transacting with the third party.

So whatever that you have sold to the third party

will not be reversed because that has been finalized.

You'll be count the transaction that you have done with

the party here.

We're not going to reverse anything that we have.

So above from the party what we are going to

reverse its whatever still left within the group that comes

from the internal transaction.

Not good.

So take an example of this one here where exactly

the same uh examples and information from what we get

in part one.

Now the only things change is that you assume that

you only have $500 rather than the whole infantry left,

assuming that only $500 of infantry left on hand now.

Okay so take an example of this one here.

So remember just now, part one where we reverse well

reversed infantry to go down by $2000 What will happen

now if infantry 1005 have been sold?

1500 profit that we recognize that and we have rivers

in the interest group.

Now, only 1000 only 500 left.

The remaining 1005 have been sold to the external party.

So what do we do?

This is the reversal entry that you will make.

Okay, And I'll give you the working next on how

we come up with this reversal entry.

So have a look at the next entry here exactly

the same.

So you have cash and sales revenue in 10,000 from

Emily's record as the cell up and then you also

be recording costs of self and in century 8000 here.

Well, from Jessica, the perspective now from the buying perspective

is Jessica bo 10,000 inventory and cash 10,000.

Same explanation, saying with our previous question so far then

what will happen?

This is where the scenario change a little bit Jessica

sold to external party for parts of the inventory.

After the selling.

Only 500.

Love in the inventory at the end of the year

Only 500 left and so on pen.

So what will be the entry that Jessica make?

So Jessica when recording the transaction with the Excellent Party,

will be recording, staying with families, cash and south revenue.

At this point at this stage we have no idea

how much Jessica so to the external party.

So we leave this one as unknown.

Um but will it actually be matters if you win?

What happens if we know the number?

What happens if we actually been told a figure?

Well that actually change anything.

The answer is no.

Okay because even if we have given the number that

is the transaction with an external party.

So even if we have been given the number there's

nothing for us to reverse.

So do not touch this here.

The one that we deal with an external party don't

touch it.

It will not be reversed.

What we sold to the extent of party will be

recognized as a leader profit follows then.

How about this cost of self inventory here?

Where are they coming from?

Remember Jessica brought from Emily?

So the cost of cells and the inventory is actually

come from an internal transaction.

Okay so when we sell the inventory, this inventory come

from the excellent transaction here.

So what we can do we then combine this Emily's

record and Jessica record here as well as Jessica record.

So let's do this.

Okay so cash 10,000.

Let's cross up one by one.

Cash. 10,000 and then we have another cash.

10,000. So cross it up.

Okay even though you have a number for this cash,

South Revenue do not touch it.

That's excellent party.

So we will not be crossing anything with an excellent

party their lives and be and then you'll have the

um South revenue here.

Sales revenue 10,000.

Okay. Uh Don't there's nothing else.

This is excellent party.

So do not touch it.

So this is the uh sales revenue 10,000 there by

himself. What will happen now?

You have cost of sales.

8000. So how many costs of cells do we have?

So we have costs of self debit.

And you have to look at this one.

We also have internal costs of cells out and five.

Because yourself is if you add it up because both

are intensified.

If you add it up it will be 9500.

Then what happened with infantry?

So let's have a look.

Infantry. 8000 there's another infantry.

So one in credit one endeavored minus them.

Okay, Deb is greater infantry?

David 2000 is.

What do we still have an infantry here?

Yes, we do.

So infantry.

Remember just now after offset inventory W 2011 we now

have infantry again.

Credit. So you need to minus it.

2000 left offer minus 1005 that will leave you with

inventory still sitting left of a rabbit.

500. Okay, So that's how we get the cost of

sale of 9005 because cost of cells is intended site

8000 plus 1,005 years.

Sales revenue by its own uncredited fied and also infantry

comes from inventory, 10,000 minus the inventory.

Credit eight and an inventory 1005.

So 10,000 minus 9005 leave you with 500.

If we reverse it, then this is what it will

look like.

Okay, so they will explain to you how we get

these figures here.

Now? What happens if you have another scenario where you

have a transfer of infantry?

What happened if now the inventory after use of Emily

sell to Jessica?

However, if Jessica now have so all inventory to the

external party, nothing to be adjusted if nothing to be

adjusted, meaning that there's no infantry accounts left Within the

group for us to adjust.

We cannot adjust anything because there's nothing left.

So what we can adjust is pretty much only the

cells and the cost of cells.

So we do recognize that when Emily sold to Jessica,

there's $2,000 profit.

And when Jessica saw in this case, Jessica bought for

10,000 sold to extend a party for 8000.

So the recorded profit that the group will recognize is

10 Okay profit for the group is basically the selling

price to the entity minus the cost to the group.

So 10,000 profit uh will be adjusted here.

So because there's no infantry left hands, there's nothing no

adjustment to the infantry account.

The reversal entry will only involve the south revenue which

is internal, which is from Emily to Jessica.

And the cost of self is from Jessica bought from

Emily. So our general entry here, if we saw all

the infantry to the external party, nothing left will only

be able to adjust the south revenue and the cost

of cells, which is 10,000 in this case, that equal

to the a month, right equal to the amount energetic

and sold?

10,000. And how much is the infantry when when Jessica

put for 10,000?

And how much is the cost of the, of the

infantry, Jessica?

So to the Excellent Party.

So that is your reversal entry, we can see that

tells revenues go down as well as south cause of

South Dakota.

Okay, what happened now if we have a beginning, uh,

in the beginning of the century, we don't recognize a

profit. So any transfer inventory that remain unsold at the

end of one period will still be on hand and

roll off at the beginning inventory for the next period.

Because the consolidation adjustments are made only in the worksheet

and not in the record of an illegal entity.

Any differences in the legal entity and consolidated must still

be there in the beginning on the next period.

So for example, here, let's say in the beginning period

you don't have Emily still have on hand, inventory was

7000 transfer from Jessica in June 2018.

So it rolled over.

The inventory had previously caused Jessica 4005.

And there is a tax rate.

So much is think about this one.

Jessica sold the inventory originally cost 4005.

Jessica sold the inventory to 7000.

Okay, So there's again when Jessica saw 4,005 -7000 a

profit for 2500.

And here meaning that the value of the infantry originally

4,005 increased to 7000.

So normally the infantry will increase by 2500.

Remember this is normal account.

Okay, so if there's an infantry left offer so you

then have the general entry.

Normally there's a sales revenue of 7000 cost of self-4005.

Infantry will then be 2005 when we reverse it.

Okay when we reverse it it will then look like

this. Sales revenue will go down.

7000 cause of cells will go down and infantry with

normal entry goes up because it goes up.

When we reverse something that goes up will now go

down. Okay?

Infantry of the reversal will now go down and what

will be the text effect?

Remember what I mentioned and remind you to text in

the video part one.

If the athletes go down you will not be taxed.

What you can claim is the tax benefit in the

form of A.

D. T.

A. 30 of the inventory value, 30 of the 2005.

So that will give you 750 tax benefits that you

can claim as well as the decrease in your income

tax expense.

Now, this one here because it is being recorded in

the beginning period, Then you also need to make an

adjustment which is necessary to the consolidated financial statement prepared

for 30 of June 2019.

So here this is the required adjustment that you make

and retain, and it will go down and cause of

cells will also go down, reflecting the portion of profit

that being brought up.

All right, thanks, guys, I'll see you in poetry where

we'll look at another category of the integral transaction.

See Yeah.

BUACC5932 week 9 Intragroup transaction pt.2

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