Exercise 22.4 ★ ★ CONSOLIDATION WORKSHEET, CONSOLIDATED FINANCIAL STATEMENTS On 1 July 2015, Sienna Ltd acquired all the shares of Amber Ltd for $160 000. The fi nancial statements of the two entities at 30 June 2016 contained the following information:

Additional information

(a) At 1 July 2015, all identifi able assets and liabilities of Amber Ltd were recorded at fair values except for inventory, for which the fair value was $1000 greater than the carrying amount. This inventory was all sold by 30 June 2016. At 1 July 2015, Amber Ltd had research and development outlays that it had expensed as incurred. Sienna Ltd measured the fair value of the in-process research and development at $8000. By 30 June 2016, it was assessed that $2000 of this was not recoverable. At 1 July 2015, Amber Ltd had reported a contingent liability relating to a guarantee that was considered to have a fair value of $7000. This liability still existed at 30 June 2016. At 1 July 2015, Amber Ltd had not recorded any goodwill.

(b) The debentures were issued by Amber Ltd at nominal value on 1 July 2014, and are redeemable on 30 June 2020. Sienna Ltd acquired its holding ($60 000) of these debentures on the open market on 1 January 2016, immediately after the half-yearly interest payment had been made. All interest has been paid and brought to account in the records of both entities.

(c) During the 2015–16 period, Sienna Ltd sold inventory to Amber Ltd for $40 000, at a mark-up of cost plus 25%. At 30 June 2016, $10 000 worth of inventory was still held by Amber Ltd.

(d) The Other Components of Equity account relates to the fi nancial assets. For the 2015–16 period, Sienna Ltd recorded an increase in these assets of $3000, and Amber Ltd recorded a decrease of $2000.

(e) The income tax rate is 30%. Required Prepare the consolidated fi nancial statements for Sienna Ltd and its subsidiary for the year ended 30 June 2016.