Assignment Question Part B Business combinations and Consolidation: wholly owned entities X Ltd acquired all the issued shares (ex dividend) of Y Ltd on 1 July 2017 for $24,600. At this date the equity of Y Ltd consisted of the following. Share Capital $13,000 General Reserve 5,000 Retained Earnings 4,050 At the acquisition date all the identifiable assets and liabilities of Y Ltd were recorded at amounts equal to the fair value except for the following. Carrying amount Fair value Plant (cost $23,000 $20,000 $21,000 Land 10,000 12,000 Inventories 3,000 3,800 The plant was considered to have a further 5-year life. The plant was sold for $15,500 on 1 January 2019. The land was sold on 1 February 2018 for $15,000. The inventories were all sold by 30 June 2018. Also, at acquisition date Y Ltd had recorded a dividend payable of $700 and goodwill (net of accumulated impairment losses of $1,300) of $500. Y Ltd had not recorded some internally generated brands that X Ltd considered to have a fair value of $1,200. The brand was considered to have an indefinite life. Also not recorded by Y Ltd was a contingent liability relating to a current court case in which Y Ltd was involved and a supplier was seeking compensation. X Ltd placed a fair value of $1,500 on this liability. This court case was settled in May 2019 at which time Y Ltd was required to pay damages of $1,600. In February 2018, Y Ltd transferred $2,000 from the general reserve on hand at 1 July 2017 to retained earnings. A further $1,500 was transferred in February 2019. Both companies have an equity account entitled Other components of equity that recognise certain gains and losses from financial assets. At 1 July 2018, the balances of these accounts were $3,000 for X Ltd and $1,500 for Y Ltd. The financial statements of the two companies at 30 June 2019 contained the following information. X Limited Y limited Revenues 13,000 6,400 Expenses (7,000) (4,200) Trading profit 6,000 2,200 Gains (losses) on sale of non-current assets 3,000 800 Profit before tax 9,000 3,000 Income tax expense (2,000) (500) Profit for the period 7,000 2,500 Retained Earnings (1/7/18) 33,300 5,500 Transfer from General reserve 3,000 1,500 43,300 9,500 Dividend paid (2,000) 0 Retained earnings (30/6/19) 41,300 9,500 Share capital 15,000 13,000 General reserve 1,000 2,000 Other component of Equity 2,500 1,800 Total Equity 59,800 26,300 Accounts payable 4,000 1,000 Deferred tax liability 1,800 1,000 Other non-current liabilities 24,800 23,000 Total liabilities 30,600 25,000 Total Equity and liabilities 90,400 51,300 Plant 43,000 38,800 Accumulated Depreciation- Plant (18,200) (22,000) Land 15,000 20,000 Brands 8,000 0 Shares in Y limited 24,600 0 Financial Assets 11,000 10,500 Cash 1,000 500 Inventories 4,000 3,000 Goodwill 2,000 1,800 Accumulated Impairment Losses 0 (1,300) Total Assets 90,400 51,300 Required 1. Prepare the acquisition analysis at 1 July 2017. (5 marks) 2. Prepare the consolidation worksheet entries for X Ltds group at 30 June 2019. (12 marks) 3. Prepare the consolidated worksheet for X Ltds group at 30 June 2019. (10 marks)