Blue Ltd acquired all the equity in Sky Ltd on 31 December 20X4 for $360 000. At the control date, the equity of Sky was recorded as Paid-up capital of $270 000 and Retained profits of $35 000. The purchase price was based on the agreed fair values of Skys identifiable assets and liabilities on that date. The following item was not at fair value in Skys financial statements on the control date. Carrying amount ($) Fair value ($) Inventory 32 000 42 000

Other information: Sky sold goods to Blue for $7 000 during FY20X6, the cost of these inventories was $5 000. Half of these inventories were still on hand by Blue by 31 December 20X6, the year-end. Blue sold a vehicle to Sky on 31 December 20X4 for $88 000. The vehicle originally cost Blue $100 000 and had zero residual value. Blue depreciated the vehicle at the rate of 20% p.a. using the straight-line method. The vehicle was 1 year old at the time of the intragroup sale. The vehicles residual value and useful life were not affected by the sale. Sky depreciates the vehicle also using the straight-line method.