Undervalued and unrecorded assets, pre‐acquisition reserves transfers   LO3, 4, 5, 7 On 1 July 2018, Jason Ltd held an investment in the shares in Bruce Ltd previously measured at $18600. Jason Ltd uses the fair value method to measure this investment with movements in fair value being recognised in profit or loss. Jason Ltd had acquired these shares 2 years earlier for $12 300. The shares had a fair value at 1 July 2018 of $20 000. On 1 July 2018, Jason Ltd acquired the remaining 80% of the shares (cum div.) in Bruce Ltd. The consideration for these shares consisted of 30 000 shares in Jason Ltd valued at $2.00 per share plus a brand that was carried in the records of Jason Ltd at $20 000 (net of accumulated amortisation of $3000), but the fair value at acquisition date is $24 800. On 1 July 2018, the equity of Bruce Ltd consisted of the following. Share capital $50 000 Retained earnings 32 000 At this date, Bruce Ltd had in its accounts a dividend payable of $6000, which was paid on 15 August 2018. Bruce Ltd had also recorded goodwill of $5000, net of accumulated impairment losses of $7000. Bruce Ltd had an unrecorded asset relating to internally generated trademarks that had a fair value of $8000. These had a future expected useful life of 8 years. All other identifiable assets and liabilities of Bruce Ltd were recorded at amounts equal to fair value except for the following. Carrying amount Fair value Plant (cost $90 000) $74 000 $80 000 Inventories 18 000 23 000 The plant was expected to have a further 6‐year useful life. In relation to the inventories held at 1 July 2018, 90% was sold by 30 June 2019 and the rest by 30 June 2020. The tax rate is 30%. In June 2019, Bruce Ltd transferred $2000 from retained earnings on hand at 1 July 2018 to the general reserve, and a further $3000 in June 2020. The following information was provided by the two companies at 30 June 2020. Jason Ltd Bruce Ltd Profit before tax $ 60 000 $ 55 000 Income tax expense (22 000) (18 000) Profit for the year 38 000 37 000 Retained earnings (1/7/19) 44 000 38 000 82 000 75 000 Transfer to general reserve (24 000) (5 000) Retained earnings (30/6/20) $ 58 000 $ 70 000 Share capital $150 000 $ 50 000 General reserve 42 000 7 000 Retained earnings 58 000 70 000 Total equity 250 000 127 000 Provisions 55 000 12 000 Payables 35 000 8 000 Total liabilities 90 000 20 000 Total equity and liabilities $340 000 $147 000 Cash $ 25 000 $ 14 000 Accounts receivable 50 000 25 000 Inventories 40 000 37 000 Goodwill 0 12 000 Accumulated impairment losses 0 (7 000) Shares in Bruce Ltd 100 000 0 Plant 210 000 90 000 Accumulated depreciation — plant (85 000) (24 000) Total assets $340 000 $147 000 Required 1. Prepare the journal entries for Jason Ltd at 1 July 2018 in relation to the investment in Bruce Ltd and for the receipt of the dividend in August 2018. 2. Prepare the consolidation worksheet for Jason Ltd’s group at 30 June 2020. 3. Prepare the consolidated financial statements for Jason Ltd’s group at 30 June 2020.