Captain Ltd acquired its shares in America Ltd at 1 January 2020 for $40,000 on a cum div. basis. At that date, America Ltd recorded share capital of $20 000. America Ltd had declared prior to the acquisition a dividend of $3,500 that was paid in March 2020.

Financial information for Captain Ltd and its 100% owned subsidiary, America Ltd, for the year ended 31 December 2020 is provided below:

 

Additional information:

1. The income tax rate is 30%.
2. At 1 January 2020, all identifiable assets and liabilities of America Ltd were recorded at fair value except for inventories, for which the carrying amount was $950 less than fair value. Some of these inventories have been a little slow to sell, and 10% are still on hand at 31 December 2020. Inventories on hand in America Ltd at 31 December 2020 also includes items acquired from Captain Ltd during the period ended 31 December 2020. These were sold for $8,000 at cost plus 25% by Captain Ltd.
3. 40% of the goodwill on acquisition of America Ltd by Captain Ltd was written off as the result of an impairment test on 31 December 2020.
4. During March 2020, Captain Ltd provided some management services to America Ltd at a fee of $500 paid by 31 December 2020.
5. On 1 July 2020, America Ltd sold machinery to Captain Ltd at a gain of $6,000. This machinery had a carrying amount to America Ltd of $40,000, and was considered by Captain Ltd to have a 4-year life.
6. By 31 December 2020, the financial assets acquired by Captain Ltd and America Ltd from external entities increased in value by $3,000 and $2,200 respectively with gains and losses being recognised in other comprehensive income.
7. On 1 January 2020, Captain Ltd sold an item they classified as plant to America Ltd who classified it as inventory. The sales price was $500 which included a profit to Captain Ltd of $200. America Ltd sold this to another entity on 31 March 2020 for $700.

Required:

1. Determine the gain on bargain purchase or goodwill as at acquisition date.
2. Prepare the consolidation journal entries for Captain Ltd immediately after acquisition on 1 January 2020.
3. Prepare the consolidation journal entries for Captain Ltd as at 31 December 2020.
4. Prepare the consolidation worksheet for the preparation of the consolidated financial statements by Captain Ltd as at 31 December 2020.
5. Prepare the Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2020.

Sales revenue Dividend revenue Gain on sale of property, plant and equipment Other income Total income Cost of sales Other expenses Total expenses Profit before income tax Income tax expense Profit for the period Retained earnings (1/1/20) Dividend declared Retained earnings (31/12/20). Captain Ltd $50,000 2,000 2,000 2,000 56,000 42,000 6,000 48,000 8,000 2,700 5,300 12,000 17,300 5,000 12,300 America Ltd $47,200 0 4,000 4,000 55,200 36,000 2,000 38,000 17,200 3,900 13,300 6,000 19,300 2,000 17,300