1. Undervalued and unrecorded assets, unrecorded liabilities In 20X2, LEE Ltd acquired 40% of the issued shares of Stan Ltd for $72 000. This acquisition did not give LEE Ltd control of Stan Ltd, because the ownership of Stan Ltd was held by a small number of shareholders (Stan Ltd was developed as a family business 10 years ago). On 1 July 20X6, LEE Ltd approached these family members following a death in the family and persuaded them to sell the remainder of the shares in Stan Ltd to LEE Ltd for $137 700 on a cum div. basis. Information about the two companies at 1 July 20X6 included:

LEE Ltd recorded its original investment in Stan Ltd at fair value, with changes in fair value being recognised in profit or loss.

At 1 July 20X6, the fair value of the investment, excluding dividends, was $91 800

The equity of Stan Ltd at 1 July 20X6 consisted of share capital $144 000 retained earnings $36 000

Included in the assets and liabilities recorded by Stan Ltd at 1 July 20X6 were goodwill $5400 (net of accumulated impairment losses of $3600) dividend payable $4500

On the acquisition date all the identifiable assets and liabilities of Stan Ltd were recorded at carrying amounts equal to their fair values except for inventories for which the fair value of $39 600 was $3600 greater than its carrying amount equipment for which the fair value of $94 500 was greater than the carrying amount, this being cost of $108 000 less accumulated depreciation of $18 000

LEE Ltd discovered that Stan Ltd had two assets and a contingent liability relating to guarantees for loans that had not been recorded by Stan Ltd. These were internally generated patents that had a fair value of $45 000 in-process R&D for which Stan Ltd had expensed $80 000, but LEE Ltd considered that an asset was created with a fair value of $20 000. the liability had a fair value of $9000

The tax rate is 30%

Required a. Prepare the acquisition analysis at 1 July 20X6. b. Prepare the consolidation journal entries for LEE Ltd's group at 1 July 20X6