Blue Ltd purchased 100% of the shares of Red Ltd on 1 July 2020 for $50 000. At that date the equity of the two entities was as follows:

	Blue Ltd	Red Ltd
Asset revaluation surplus	25,000	4,000
Retained earnings	14,500	2,800
Share capital	50,000	40,000

At 1 July 2020, all the identifiable assets and liabilities of Red Ltd were recorded at fair value except for the following:

	Carrying amount	Fair value
Inventory	3,000	3,500
Plant and equipment (cost $80,000)	60,000	61,000

All of the inventory was sold by December 2020. The plant and equipment had a further 5-year useful life. Any valuation adjustments are made on consolidation.

Financial information for Blue Ltd and Red Ltd for the period ended 30 June 2022 is shown below:

	Blue Ltd	Red Ltd
Sales revenue	39,000	50,000
Cost of sales	30,000	15,000
Gross Profit	9,000	35,000
Dividend revenue	2,200	800
Other income	20,000	1,600
Gain on sale of furniture	-	250
Total income	31,200	37,650
Other expenses	7,000	22,500
Profit before income tax	24,200	15,150
Income tax expense	1,500	1,100
Profit for the period	22,700	14,050
Retained earnings (1/7/21)	7,250	1,400
Retained earnings (1/7/21) + profit	29,950	15,450
Interim dividend paid	(2,000)	(1,000)
Final dividend declared	(4,000)	(1,200)
Total dividends	(6,000)	(2,200)
Retained earnings (30/6/22)	23,950	13,250

Additional information:

1. Blue Ltd records dividend receivable as revenue when dividends are declared.
2. The beginning inventory of Red Ltd at 1 July 2021 included goods which cost Red Ltd $1,000. Red Ltd purchased this inventory from Blue Ltd at a mark-up of one third on cost. The inventory was sold to external entities during the year ended 30 June 2022
3. Inventory sold from Blue Ltd to Red Ltd, at a mark-up of 10% on cost, amounted to $2,800. These items were sold to external entities during the year ended 30 June 2022.
4. The ending inventory of Blue Ltd included goods which cost Blue Ltd $2,200. Blue Ltd purchased these inventory from Red Ltd at a mark-up of 10% on cost.
5. On 31 December 2021, Red Ltd sold Blue Ltd office furniture for $1,500. This furniture originally cost Red Ltd $1,500 and was written down to $1,250 just before the intragroup sale. Blue Ltd depreciates furniture at the rate of 10% per year on cost.
6. Red Ltd paid $20,000 during the period ended 30 June 2022 and $40,000 during the period ended 30 June 2021 as management fees for services provided by Blue Ltd.
7. On 1 January 2022, Red Ltd issues 2,000 debentures at the nominal value of $20 with an interest rate of 8% p.a., payable half-yearly on 30 June and 31 December each year. Debentures are to be redeemed after 3 years. Blue Ltd takes 100% of the debentures issued.
8. The income tax rate is 30%.
9. The asset revaluation surplus relates to land. The following movements occurred in this account:

	Blue Ltd	Red Ltd
1 July 2020 to 30 June 2021	1,500	(250)
1 July 2021 to 30 June 2022	1,000	250

Required:

1. Determine the gain on bargain purchase or goodwill as at acquisition date. (3 marks)
2. Prepare the consolidation journal entries immediately after acquisition on 1 July 2020. (5 marks)
3. Prepare the consolidation journal entries as at 30 June 2022. (14 marks)
4. Prepare the consolidation worksheet for the preparation of the consolidated financial statements as at 30 June 2022. (7 marks)
5. Prepare the Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2022. (6 marks)