Berry Springs Ltd acquired all the issued shares (cum div.) of Litchfield Ltd on 1 July 2014. At this date the shareholders' equity of Litchfield Ltd was:

Share capital - 100 000 shares $450 000

General reserve 45 000

Asset revaluation surplus 45 000

Retained earnings 15 000

At 1 July 2014, the accounting records of Litchfield Ltd contained a dividend payable of $30 000. This dividend was paid in August 2014. All the identifiable assets and liabilities at acquisition date were recorded at amounts equal to their fair values except for:

Carrying amount Fair value

Plant (cost $29 000) $220 000 $227 500

Inventory 160 000 175 000

The plant was considered to have a further 5-year life. It was sold on 1 January 2017 for $118 000. The inventory was all sold by 30 June 2015. Litchfield Ltd did not record a contingent liability relating to a lawsuit by a customer for faulty goods. Litchfield Ltd considered this liability had a fair value of $18 000. The lawsuit was settled in May 2015 when Litchfield Ltd was required to pay damages of $20 000.

Additional information (a) On 1 July 2015, Berry Springs Ltd sold plant to Litchfield Ltd at a before-tax profit of $6000. This class of non-current asset is depreciated at 20% p.a. on cost by Berry Springs Ltd while Litchfield Ltd uses a rate of 10% p.a. on cost.

(b) In June 2016 Litchfield Ltd sold $50 000 worth of inventory to Berry Springs Ltd at a beforetax profit of $5400. At 30 June 2017, inventory on which Litchfield Ltd had made a profit of $750 on sale to Berry Springs Ltd was still on hand.

(c) On 10 February 2017, Litchfield Ltd used the whole of the general reserve existing at 1 July 2014 to pay a bonus dividend of three shares for every ten held.

(d) Both Berry Springs Ltd and Litchfield Ltd use the valuation method to measure land. In June 2017, Berry Springs Ltd recorded revaluation increases of $15 000 while Litchfield Ltd recorded increases of $12 000.

(e) The tax rate is 30%.

Financial information provided by the companies at 30 June 2017 was as follows:

Berry Springs Ltd Litchfield Ltd

Plant $ 558 750 $ 318 000

Accumulated depreciation-plant (318 000) (165 000)

Land 531 300 397 500

Shares in Litchfield Ltd 594 000 __

Inventory 270 000 240 000

Receivables 43 500 22 500

Cash 37 500 15 000

Total Assets $1 717 050 $828 000

Dividend payable 15 000 6 000

Other current liabilities 52 050 60 000

Loans 150 000 60 000

Total liabilities $217 050 $126 000

Share capital $1 200 000 $495 000

Asset revaluation surplus 225 000 120 000

Retained earnings(1/7/16) 22 500 18 000

Revenues 162 000 210 000

Expenses (48 000) (80 000)

Gains (losses) on sale of non-current 6 000 5 000

assets

Tax expense (52 500) (60 000)

Dividend declared (15 000) (6 000)

Total equity $1 500 000 $702 000

Required Prepare the consolidation worksheet JOURNAL ENTRIES for the preparation of consolidated financial statements by Berry Springs Ltd at 30 June 2017.

NOTE a consolidation worksheet is NOT required.

Your answer should include an acquisition analysis with a calculation of goodwill, business combination valuation entries, pre-acquisition entries, dividend adjustments, intragroup sales and transfers.