1. Starling Ltd purchased 100% of the issued shares in City Ltd on 1 July 2019 for $140 000. City Ltds assets were all recorded at fair value, except for land which was undervalued by $50,000.

2. On acquisition shareholders funds of City Ltd were as follows:

Contributed capital$100 000

Retained earnings/(loss)$(14 000)

$86 000

3. Directors determined that $3,500 be recognised annually for goodwill impairment loss.

During the financial year ending 30 June 2021:

4. Starling Ltds opening inventory at 1.7.20 included $12 000 of unrealised profit from intragroup sales made during the year ending 30.6.20. Further intragroup sales of $70 000 were made during the year ending 30.6.21 and unrealised profit of $10 000 remains in inventory at 30.6.21.

5. Starling Ltd provides management services to City Ltd. During the year ending 2021, City Ltd paid $6,300 for these services and has a balance of $5 000 for management fees payable at 30 June 2021. As at 30 June 2020, the management fee payable balance was $2 300.

6. Starling Ltd declared and paid dividends of $32 000. City Ltd declared and paid dividends of $12 000.

Required:

Prepare all consolidation/elimination journal entries for the year ending 30 June 2021 assuming a tax rate of 30%.

Note: all workings should be shown and the journal presented in a professional manner. Journal numbering must match the transaction numbers given above for each event. If more than one journal entry is required for an event, then add a letter (starting at a) to the relevant number. For example, if more than one journal is required for event 1 (acquisition), number them as 1a, 1b, 1c, etc.