Undervalued and unrecorded assets, unrecorded liabilities, pre‐acquisition reserves transfers    LO3, 5, 7 George Ltd acquired all the issued shares (ex div.) of Francis Ltd on 1 July 2017 for $246 000. At this date the equity of Francis Ltd consisted of the following. Share capital $130 000 General reserve 50 000 Retained earnings 40 500 At the acquisition date all the identifiable assets and liabilities of Francis Ltd were recorded at amounts equal to the fair value except for the following. Carrying amount Fair value Plant (cost $230 000) $200 000 $210 000 Land 100 000 120 000 Inventories 30 000 38 000 The plant was considered to have a further 5‐year life. The plant was sold for $155 000 on 1 January 2019. The land was sold on 1 February 2018 for $150 000. The inventories were all sold by 30 June 2018. Also at acquisition date Francis Ltd had recorded a dividend payable of $7000 and goodwill (net of accumulated impairment losses of $13000) of $5000. Francis Ltd had not recorded an internally generated brand that George Ltd considered to have a fair value of $12 000. The brand was considered to have an indefinite life. Also not recorded by Francis Ltd was a contingent liability relating to a current court case in which Francis Ltd was involved with a supplier that was seeking compensation. George Ltd placed a fair value of $15 000 on this liability. This court case was settled in May 2019 at which time Francis Ltd was required to pay damages of $16 000. In February 2018, Francis Ltd transferred $20 000 from the general reserve on hand at 1 July 2017 to retained earnings. A further $15 000 was transferred in February 2019. Both companies have an equity account entitled ‘Other components of equity’ that recognise certain gains and losses from financial assets. At 1 July 2018, the balances of these accounts were $30 000 for George Ltd and $15 000 for Francis Ltd. The financial statements of the two companies at 30 June 2019 contained the following information. George Ltd Francis Ltd Revenues $ 130 000 $ 64 000 Expenses (70 000) (42 000) Trading profit $ 60 000 $ 22 000 Gains (losses) on sale of non‐current assets 30 000 8 000 Profit before tax $ 90 000 $ 30 000 Income tax expense (20 000) (5 000) Profit for the period $ 70 000 $ 25 000 Retained earnings (1/7/18) 333 000 55 000 Transfer from general reserve 30 000 15 000 $ 433 000 $ 95 000 Dividend paid (20 000) 0 Retained earnings (30/6/19) $ 413 000 $ 95 000 Share capital 150 000 130 000 General reserve 10 000 20 000 Other components of equity 25 000 18 000 Total equity $ 598 000 $ 263 000 Accounts payable 40 000 10 000 Deferred tax liability 18 000 10 000 Other non‐current liabilities 248 000 230 000 Total liabilities $ 306 000 $ 250 000 Total equity and liabilities $ 904 000 $ 513 000 Plant 430 000 388 000 Accumulated depreciation — plant (182 000) (220 000) Land 150 000 200 000 Brands 80 000 0 Shares in Francis Ltd 246 000 0 Financial assets 110 000 105 000 Cash 10 000 5 000 Inventories 40 000 30 000 Goodwill 20 000 18 000 Accumulated impairment losses 0 (13 000) Total assets $ 904 000 $ 513 000 Required 1. Prepare the acquisition analysis at 1 July 2017. 2. Prepare the consolidation worksheet entries for George Ltd’s group at 30 June 2019. 3. Prepare the consolidated financial statements for George Ltd’s group at 30 June 2019.