27.20 Undervalued and unrecorded assets, unrecorded liabilities, pre-acquisition reserves transfers LO3, 5, 7 Jersey Ltd acquired all the issued shares (ex div.) of Boys Ltd on 1 July 2020 for $492000. At this date the equity of Boys Ltd consisted of the following. Share capital General reserve Retained earnings $260 000 100 000 81000 At the acquisition date all the identifiable assets and liabilities of Boys Ltd were recorded at amounts equal to the fair value except for the following. Plant (cost $460000) Land Inventories Carrying amount $400 000 200 000 60 000 Fair value $420 000 240 000 76000 The plant was considered to have a further 5-year life. The plant was sold for $310000 on 1 January 2022. The land was sold on 1 February 2021 for $300 000. The inventories were all sold by 30 June 2021. Also at acquisition date Boys Ltd had recorded a dividend payable of $14000 and goodwill (net of accumulated impairment losses of $26000) of S10 000. Boys Ltd had not recorded an internally generated brand that Jersey Ltd considered to have a fair value of $24 000. The brand was considered to have an indefinite life. Also not recorded by Boys Ltd was a contingent liability relating to a current court case in which Boys Ltd was involved with a supplier that was seeking compensation. Jersey Ltd placed a fair value of $30 000 on this liability. This court case was settled in May 2022 at which time Boys Ltd was required to pay damages of $32000. In February 2021, Boys Ltd transferred $20 000 from the general reserve on hand at I July 2020 to retained earnings. A further $30000 was transferred in February 2022. In February 2021, Boys Ltd transferred $20 000 from the general reserve on hand at 1 July 2020 to retained earnings. A further $30 000 was transferred in February 2022. Both companies have an equity account entitled 'Other components of equity that recognise certain gains and losses from financial assets. At 1 July 2021, the balances of these accounts were $60 000 for Jersey Ltd and $30 000 for Boys Ltd. The financial statements of the two companies at 30 June 2022 contained the following information Revenues Expenses Trading profit Gains (losses) on sale of non-current assets Profit before tax Income tax expense Profit for the period Retained earnings (1/7/21) Transfer from general reserve Dividend paid Retained earnings (30/6/22) Share capital General reserve Other components of equity Total equity Accounts payable Deferred tax liability Other non-current liabilities Total liabilities Total equity and liabilities Plant Accumulated depreciation - plant Land Brands Shares in Boys Ltd Financial assets Cash Inventories Goodwill Accumulated impairment losses Total assets Jersey Ltd $ 260 000 (140 000) 120 000 60 000 180 000 (40000) 140 000 666 000 60 000 866 000 (40000) 826000 300 000 20000 50 000 1196 000 80 000 36 000 496 000 612 000 $1 808 000 $ 860 000 (364000) 300 000 160000 492 000 220 000 20 000 80 000 40 000 0 $1808 000 Boys Ltd $ 128 000 (84000) 44000 16 000 60 000 (10000) 50 000 110 000 30 000 190 000 0 190 000 260 000 40 000 36000 526 000 20 000 20 000 460 000 500 000 $1026 000 $ 776000 (440 000) 400 000 0 210 000 10 000 60 000 36000 126 000) $1026 000 Required 1. Prepare the acquisition analysis at 1 July 2020. 2. Prepare the consolidation worksheet entries for Jersey Ltd's group at 30 June 2022. 3. Prepare the consolidated financial statements for Jersey Ltd's group at 30 June 2022