Black Ltd acquired 25% of the shares of White Ltd on 1 July for $58,000. At acquisition date the equity of White Ltd consisted of:

Share Capital $110,000

General Reserve $40,000

Retained Earnings $90,000

At the date of acquisition, all the assets and liabilities of White Ltd were recorded at fair value other than the following:

Carrying Amount Fair Value

Equipment (cost $20,000) $14,000 $19,000

Inventory $5,000 $8,000

The inventory was sold by 30 June 2017. The equipment has a remaining useful life of 10 years.

Additional information:

a) The inventory of Black Ltd on 30 June 2017 included inventory purchased from White Ltd for $6,000. The original cost of the inventory was $4,000. The inventory was sold outside parties in September 2017.

b) Black Ltd sold inventory to White Ltd for $9,000 on 1 June 2018. The sale price represented a mark-up of 35% cost. By 30 June 2018 White Ltd had sold 40% of this inventory outside the group.

c) On 1 June 2018 Black Ltd sold an item of plant to White Ltd for $11,000. The carrying amount at the time of sale was $9,000 (cost was $11,000). At the time of the sale the asset had a remaining useful life of 4 years.

d) The investment account is not considered impaired.

e) Relevant information for White Ltd for the year ended 30 June 2017 and 2018 are shown below:

2017 2018 Profit before tax $30,000 $35,000 Income tax expense $9,000 $10,500 Profit after tax $21,000 $24,500 Retained profits - Opening Balance $90,000 $91,000 Dividend paid ($20,000) ($22,000) Transfer to General Reserve ($5,000) Retained profits - Closing balance $91,000 $88,500 General Reserve $40,000 $45,000 Share Capital $110,000 $110,000 Revaluation Surplus $45,000