Cindy Ltd (Cindy) acquired all issued share capital of Cotter Ltd (Cotter) on 1 July 2020 for a cash payment of $1,000,000. The share capital and retained earnings of Cotter at the date of acquisition were:

Share capital $500,000

Retained earnings $350,000

At the date of acquisition, all assets and liabilities of Cotter were carried at fair values with the exception of the following assets:

	Carrying Amount	Fair Value
Machinery (cost $110 000)	$80,000	$90,000
Land	$100,000	$150,000

The machinery had a further 10-year useful life as at the date of acquisition. The land was intended to hold for further use. There were no intra-group transactions between Cindy and Cotter between 1 July 2020 and 30 June 2023.

On 1 April 2024 Cotter sold a plant to Cindy for $125,000 when its carrying value in Cotter' books was $100,000 (original cost $200,000 and original estimated life of 10 years). There were no other intra-group transactions between Cindy and Cotter for year ended 30 June 2024.

During year 2025, Cindy made sales of inventory to Cotter for on-sale to external parties. The inventory had originally cost Cindy $32,000. At the year end, Cotter still had half of the inventory on hand. On-hand inventory was expected to be sold in the subsequent period.

There were no other intro-group transactions between Cindy and Cotter for year ended 30 June 2025.

Cindy incurred the following transactions with Cotter for year ended 30 June 2026:

Cindy made sales of inventory to Cotter of $25,000, while Cotter sold $32,000 of inventory to Cindy.

Closing inventories on 30 June 2026 included the following amounts: Cindy $16,000 (bought from Cotter) and Cotter $18,500 (bought from Cindy).

Cotter has a number of long-term loans, including a four-year loan for $45,000 from Cindy. This intra-group loan was effective from 1 July 2025. Interest rate was 5% per annum. During the year ending 30June 2026, Cotter paid $1000 interest on this loan.

Cindy provided management consultation to Cotter and this was the first time that Cindy provided such service to Cotter. At the end of 2026, Cotter paid $7,000 for these services and has a balance of $500 payable at year end.

You were requested to prepare the followings:

I. acquisition analysis and adjustment/elimination journal entries for consolidation at acquisition, 1 July 2020;

II. adjustment/elimination journal entries for consolidation as at 30 June 2025, and

III. adjustment/elimination journal entries for consolidation as at 30 June 2026.

NOTE;

Cindy declared dividends $75,000 and paid dividends $65,000.

Cotter declared and paid dividends $25,000.

Management team of Cindy believes that goodwill acquired from business combination was impaired by $300 in 2026. Previous goodwill impairment loss in year 2025 was 1,200.

Cindy has the following accounting policies for the group:

Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary.

All plants are depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of months the asset is held in the relevant year.

Intragroup sales of inventory to be at a mark-up of 15% on cost.

All calculated amounts are to be rounded to the nearest whole dollar. Companies in the group do not show cents in any journals, worksheets, or financial statements.

The company tax rate is 30% and this rate has not changed for a number of years.

Reporting date is 30 June.

Journal narrations are required.

Number each year consolidation elimination/adjusting journal entries by 1, 2, 3, ..., etc;. Where more than one journal entry is needed for an event to be completely accounted for add the letters a,b,c,...etc to them as necessary.