H Limited acquired 35,000 ordinary shares of FBE Limited on 1 July 2019 at a cost of $2 million to obtain control over the company. At the date of acquisition, the equity of FBE Limited was as follows: Share capital (50,000 ordinary shares) General reserve Retained earnings At 1 July 2019, all the identifiable asset and liabilities of FBE Limited were recorded at fair value except for the following assets: Inventory Machinery Carrying amount $100,000 250,000 $1,500,000 300,000 800,000 Inventory Plant The inventory was all sold by 30 June 2020. The machinery has an expected further 5-year life, with depreciation being calculated on a straight-line basis. Valuation adjustments are made on consolidation. H Limited uses the partial goodwill method to measure non-controlling interest. Fair value $150,000 350,000 On 1 July 2019, H Limited also acquired 25% of the capital of AFA Limited for $500,000 to exert significant influence over the company. All the identifiable assets and liabilities of AFA Limited were recorded at fair value except for the following Fair value Carrying amount $10,000 60,000 $12,000 70,000 All this inventory was sold by the current year end. The plant was considered to have a further 10-year life. For the year ended 30 June 2020, AFA Limited recorded an after-tax profit of $20,000. During the current year, FBE Limited sold inventory to H Limited for $60,000, with a mark-up (on cost) of 50%. H Limited has only resold 60% of these items to external parties at a profit of $5,000 by the current year end. On 1 February 2020, AFA Limited sold inventory to H Limited for $20,000. This inventory had a cost of $15,000 to AFA Limited. All of this inventory was sold out by H Limited by 30 June 2020. Information about income and changes in equity for H Limited and its subsidiary, FBE Limited, for the year ended 30 June 2020 is as follows: H Limited $ 2,500,000 (1,800,000) 700,000 Sales revenue Less: Cost of sales Gross profit Less: Depreciation Other expenses Plus: Other revenues Profit before income tax Less: Income tax expense Net Profit Plus: Retained earnings (1/7/19) Less: Dividend paid Retained earnings (30/6/20) (230,000) (110,000) 30.000 390,000 (100,000) 290,000 3,800,000 (160,000) 3,930,000 FBE Limited S 120,000 (75.000) 45,000 (14,000) (2,500) 94.000 122,500 (24,000) 98,500 Ignore taxation. 800,000 (15,000) 883,500 Required: (a) Prepare all necessary consolidation adjusting entries for H Group for the year ended 30 June 2020. [27 marks] (b) Prepare the consolidated statement of profit or loss and other comprehensive income for H Group for the year ended 30 June 2020. [9 marks] (c) Compute the balances of the following accounts in the consolidated statement of financial position of H Group as of 30 June 2020: [4 marks] (1) Investment in FBE Limited (2) Investment in AFA Limited (3) Non-controlling interests