1.1) The information below relates to Letsdothis Ltd and Havedoneit Ltd.

On 1 July 2019, Letsdothis Ltd acquired all of the issued shares of Havedoneit Ltd for $635,000. At the acquisition date the equity of Havedoneit Ltd consisted of:

Share capital $225,000

Reserves 205,000

Retained earnings 190,000

At the date of acquisition this equity reflected the fair values of all the identifiable assets and liabilities of Havedoneit Ltd with the exception of Machinery which had a fair value $4,000 greater than its carrying amount. The corporate tax rate is 30%.

Required

1. Prepare n analysis of the situation and also prepare the 30 June 2020 consolidation journal entries (with narrations) that are relevant to the above transactions and events for the books/records of the parent company.

1. On 30 June 2020, the drafted individual financial statements of both companies are given as below. Based on the adjustment entries you have provided, complete the consolidation worksheet for 30 June 2020 provided below.

Letsdothis ltd Havedoneit ltd

Sales revenue 86000 345000

Cost of goods sold 340000 160000

Gross profit 52000 185000

Other expenses 20000 35000

Profit before tax 500000 150000

Income tax expenses 150000 45000

Net profit after tax 350000 105000

Opening retained earnings 195000 190000

Closing retained earnings 545000 295000

Share capital 300000 225000

Reserves 105250 205000

Business Combination

Valuation Reserve

Payables 210000 100000

Deferred tax liabilities 134750 6000

1295000 831000

Cash 125500 407500

Machinery 193000 55000

Deferred tax assets 16500 20000

Land 325000 348500

Investment 725000

Goodwill(carrying amount)

1295000 831000

1.2) Whatthe Ltd owns all of the shares of Havethe Ltd. In relation to the following intragroup

transactions, prepare the consolidation worksheet adjusting entries for the preparation of the

consolidated financial statements as at 30 June 2020. Assuming an income tax rate of 30%

i) Whatthe Ltd sold inventory to Havethe Ltd on "me 2020 for $9,500. This inventory had

cost Whatthe Ltd $6,000. One-quater of the inventory was sold by Havethe Ltd to Goaway Ltd

for $6,000 and one-quarter was sold to Goneaway Ltd for $8,000 by 30 June 2020.

ii) Whatthe Ltd also manufactures certain products which then sells through Havethe Ltd.

During December 2019, Whatthe Ltd sold stock for 535,000 to Havethe Ltd at cost plus 25%.

Havethe Ltd has since sold three-quarters of these products to external parties as at 30 June

2020.