Exercise 21.3 ★ ACQUISITION ANALYSIS, PARENT HOLDS PREVIOUSLY ACQUIRED SHARES IN SUBSIDIARY, WORKSHEET ENTRIES AT ACQUISITION DATE At 1 July 2014, Pavo Ltd acquired 60% of the shares of Octans Ltd for £153 000 on a cum div. basis. Pavo Ltd had acquired 40% of the shares of Octans Ltd 2 years earlier for £80 000. This investment, classifi ed as a fi nancial asset, was recorded using the equity method on 1 July 2014 of £102 000. At 1 July 2014, the equity of Octans Ltd consisted of: Share capital Retained earnings £160 000 40 000 At this date, the identifi able assets and liabilities of Octans Ltd were recorded at fair value except for: Carrying amount Fair value Inventory Plant (cost £120 000) £ 40 000 100 000 £ 44 000 105 000 At 1 July 2014, Octans Ltd’s assets and liabilities included a dividend payable of £5 000. An analysis of the unrecorded intangibles of Octans Ltd revealed that the company had unrecorded internally generated brands, considered to have a fair value of £50 000. Further, Octans Ltd had expensed research outlays of £80 000 that were considered to have a fair value of £20 000. In its fi nancial statements at 30 June 2014, Octans Ltd had reported a contingent liability relating to a potential claim by customers for unsatisfactory products, the fair value of the claim being £10 000. The tax rate is 30%. Required Prepare the acquisition analysis at 1 July 2014, and the consolidation worksheet entries for preparation of consolidated fi nancial statements of Pavo Ltd at that date.