ABC ltd acquired 100% share of XYZ Ltd on 1 July 2020. The investment costs 650,000. The capital and reserves of XYZ at that time was:

Share capital 245,000

Retained earnings 115,000

All assets of acquisition were fairly valued except a plant that had fair value 30,000 higher than its carrying amount. The plant was cost 100,000 and its accumulated depreciation of 60,000. Plants original estimated useful life is 10 years.

In F/y 20-21, XYZ sold 29,000 inventories to ABC for on-sale external parties. The inventory was originally cost XYZ 22,000. At the end of year, ABC had half of the inventory on hand. The on hand inventory was expected to be sold in the next period. (no dividend was claimed and paid from both entities during 20-21 F/Y. no other intro-group transaction between 2 entities in F/y 20-21).

The following transaction was made in F/Y 21-22:

• ABC sold 51,000 of inventories to XYZ while XYZ sold 76,000 inventory to ABC. These inventories will be sold to external parties.
• Closing inventories in ABC at cost 36,000 (including inventory acquired from XYZ). XYZ have to spend 29,000 to buy. All inventory acquired was sold to external parties by XYZ during the year.
• On 1 July 2021, XYZ bought a machinery from ABC with the cost of 145,000. Its carrying amount in ABCs account was 100,000 (originally cost 168,650, accumulated depreciation 68,650). The assessed useful life remains 9 years.
• At the end of 2022, XYZ paid 8,000 for management consultation which is provided by ABC. This is the first time that ABC provided this service.
• One of the long-term loan of XYZ is the loan 0f 60,000 from ABC. The term of loan is 4 years. This loan started on 1 July 2021. Interest rate was 5% p.a. During the year, XYZ paid interest of this loan for 1,500.

Requirement:

1. Acquisition analysis and adjustment/elimination journal entries for consolidation at acquisition, 1 July 2020.
2. Adjustment/elimination journal entries for consolidation as at 30 June 2021.
3. Adjustment/elimination journal entries for consolidation as at 30 June 2022.

The following information which you will need to complete your work is collected after the meeting with supervisor:

• The revaluation adjustments on acquisition are to be made on consolidation only, not in the book of any subsidiary.
• Straight-line method is use for depreciation of plant and machinery with no residual value.
• All calculation is rounded to nearest dollar.

+ Goodwill acquired from business combination is impaired by 6,000 in the F/y 21/22. Last impairment of goodwill was 5,000.

+ ABC has small shareholding in other companies.

+ XYZ declared and paid 93,000 of dividend on 30 June 2022.

+ ABC declared 200,000 and paid 150,000 of dividend on 30 June 2022

+ company tax rate is 30%. Journal narration is required.

+ Number each year consolidation elimination/ adjusting journal entries by 1,2,3,, where more than 1 journal entry is needed for an event to be completely accounted for add the letter a,b,c, to them as necessary.