FIPE Ltd acquired 100% of the shares of ZAIN Ltd on 1 July 2017 for $600 000, when the equity of ZAIN Ltd consisted of:

Share capital $450 000

General Reserve $70 000

Retained earnings $45 000

Asset revaluation reserve $10 800

All identifiable assets and liabilities of ZAIN Ltd are recorded at fair value at this date except for inventories for which the fair value was $10,000 greater than carrying amount, and plant which had a carrying amount of $150,000 (net of $40,000 accumulated depreciation) and a fair value of $170,000. The inventories were all sold by 30 June 2018, and the plant had a further 5-year life with depreciation based on the straight-line method.

Financial information for both companies at 30 June 2020 is as follows:

FIPE LtdZAIN Ltd

$ $

Sales revenue 720 000 530 000

Other revenue 240 000 120 000

960 000 650 000

Cost of sales (610 000) (410 000)

Other expenses (230 000) (160 000)

(840 000) (570 000)

Profit before tax 120 000 80 000

Tax expense (40 000) (25 000)

Profit for the period 80 000 55 000

Retained earnings at 1/7/19 200 000 112 000

280 000 167 000

Dividend paid (20 000) (10 000)

Dividend declared (25 000) (15 000)

(45 000) (25 000)

Retained earnings at 30/6/20 235 000 142 000

Share capital 600 000 500 000

Asset revaluation surplus* 20 000 60 000

General reserve 80 000 100 000

Total equity 935 000 802 000

Dividend payable 25 000 15 000

Other liabilities 25 000 25 000

Total liabilities 50 000 40 000

Total equity and liabilities 985 000 842 000

Receivables 40 000 30 000

Inventory 100 000 170 000

Plant and equipment 200 000 500 000

Accumulated depreciation (115 000) (88 000)

Land at fair value 80 000 80 000

Shares in ZAIN Ltd 600 000 -

Deferred tax assets50 000 40 000

Other assets 30 000 110 000

Total assets 985 000 842 000

*The balances of the surplus at 1 July 2019 were $35 000 (FIPE Ltd) and $50 000 (ZAIN Ltd)

The following transactions took place between FIPE Ltd and ZAIN Ltd:

a)During the 2019-20 period, ZAIN Ltd sold inventory to FIPE Ltd for $23 000, recording a profit before tax of $3 000. FIPE Ltd has since resold half of these items.

b)During the 2019-20 period, FIPE Ltd sold inventory to ZAIN Ltd for $18 000, recording a

profit before tax of $2 000. ZAIN Ltd has not resold any of these items.

c)On 1 June 2020, ZAIN Ltd paid $1000 to FIPE Ltd for services rendered.

d)During the 2018-19 period, ZAIN Ltd sold inventory to FIPE Ltd. At 30 June 2019, FIPE Ltd still had inventory on hand on which ZAIN Ltd had recorded a before-tax profit of $4000.

e)On 1 July 2018, ZAIN Ltd sold plant to FIPE Ltd for $150 000, recording a profit of $20 000 before tax. FIPE Ltd applies a 10% p.a. straight-line method of deprecation in relation to assets.

Required:

Prepare the consolidation worksheet entries for FIPE Ltd for the year ended 30 June 2020. Assume an income tax rate of 30%.