Hi, please refer to the attachment. The attachment contains both the question and answer; the question is in red and the answer is in black. Can you please explain the answers in detail and in particular, how each journal entry was created. Also please explain the consolidation worksheet.

Question 20.7 Consolidation worksheet On 1 July 2015, Fluffy Ltd acquired all the issued shares of Glider Ltd. Fluffy Ltd paid $30 000 in cash and 20 000 shares in Fluffy Ltd valued at $3 per share. At this date, the equity of Glider Ltd consisted of $66 000 share capital and $6000 retained earnings. At 1 July 2015, all the identifiable assets and liabilities of Glider Ltd were recorded at amounts equal to their fair values except for: Plant (cost $150 000) Patents Inventory yCaingrmout $120 000 90 000 18 000 Fairvlue $123 000 105 000 22 500 The plant was considered to have a further 5-year life. The patents were sold for $120 000 to an external entity on 18 August 2015. The inventory was all sold by 30 June 2016. Additional information (a) Fluffy Ltd sells certain raw materials to Glider Ltd to be used in its manufacturing process. At 1 July 2016, Glider Ltd held inventory sold to it by Fluffy Ltd in the previous year at a profit of $600. During the 2016-17 year, Fluffy Ltd sold inventory to Glider Ltd for $21 000. None of this was on hand at 30 June 2017. (b) Glider Ltd also sells items of inventory to Fluffy Ltd. During the 2016-17 year, Glider Ltd sold goods to Fluffy Ltd for $4500. At 30 June 2017, inventory which had been sold to Fluffy Ltd at a profit of $300 was still on hand in Fluffy Ltd's inventory. (c) On 1 July 2016, Glider Ltd sold an item of plant to Fluffy Ltd for $15 000. This plant had a carrying amount in the records of Glider Ltd of $14 000 at time of sale. This type of plant is depreciated at 10% p.a. on cost. (d) On 1 January 2015, Fluffy Ltd sold an item of inventory to Glider Ltd for $18 000. The inventory had cost Fluffy Ltd $16 000. This item was classified by Glider Ltd as plant. Plant of this type is depreciated by Glider Ltd at 20% p.a. (e) On 1 March 2017, Glider Ltd sold an item of plant to Fluffy Ltd. Whereas Glider Ltd classified this as plant, Fluffy Ltd classified it as inventory. The sales price was $9000 which included a profit to Glider Ltd of $1500. Fluffy Ltd sold this to another entity on 31 March for $9900. (f) The tax rate is 30%. At 30 June 2017, the following financial information was provided by the two companies: uFfylLtd Dr Sales revenue Cost of sales Trading expenses Office expenses Depreciation expenses Proceeds on sale of plant Carrying amount of plant sold Income tax expense Share capital Retained earnings (1/7/16) Current liabilities Deferred tax liability Plant Accumulated depreciation - plant Intangibles Deferred tax assets Shares in Glider Ltd Inventory Receivables GliderLt Cr Dr Cr 78 000 64 500 30 900 4 800 7 950 1 800 46 350 9 000 4 050 3 900 9 000 7 500 11 100 15 000 14 000 7 300 96 000 48 000 21 100 11 000 57 000 66 000 31 500 10 500 15 000 107 250 18 300 12 000 8 100 90 000 28 500 8 250 267 900 267 900 33 450 11 100 9 450 0 24 600 12 450 249 450 249 450 Required Prepare a consolidation worksheet for the preparation of the consolidated financial statements of Fluffy Ltd at 30 June 2017. At 1 July 2015: Net fair value of identifiable assets and liabilities of Glider Ltd = Consideration transferred Goodwill = = = $66 000 + $6 000 (equity) + $4 500 (1 - 30%) (inventory) + $15 000 (1 - 30%) (patents) + $3 000 (1 - 30%) (plant) $87 750 $90 000 $2 250 1. Business combination valuation entries Accumulated depreciation Plant Deferred tax liability Business combination valuation reserve Dr Cr Cr Cr 30 000 Depreciation expense Retained earnings (1/7/16) Accumulated depreciation (1/5 x $3000 p.a. for 2 years) Dr Dr Cr 600 600 Deferred tax liability Income tax expense Dr Cr 360 27 000 900 2 100 1 200 180 Retained earnings (1/7/16) Cr Goodwill Business combination valuation reserve 180 Dr Cr 2 250 Dr Dr Dr Cr 6 000 66 000 18 000 Dr Dr Dr Cr 19 650 66 000 4 350 2 250 2. Pre-acquisition entries At 1/7/15: Retained earnings (1/7/15) Share capital Business combination valuation reserve Shares in Glider Ltd 90 000 At 30/6/17: Retained earnings (1/7/16)* Share capital Business combination valuation reserve Shares in Glider Ltd 90 000 (* = $6000 + $3 150 + $10 500) 3. Sales and profit in closing inventory Sales revenue Cost of sales Dr Cr 21 000 Sales revenue Cost of sales Inventory Dr Cr Cr 4 500 Deferred tax asset Income tax expense Dr Cr 90 Dr Dr Cr 420 180 Proceeds on sale of plant Carrying amount of plant sold Plant Dr Cr Cr 15 000 Deferred tax asset Income tax expense Dr Cr 300 Accumulated depreciation - plant Depreciation expense (10% x $1000) Dr Cr 100 21 000 4 200 300 90 4. Profit in opening inventory of Glider Ltd Retained earnings (1/7/16) Income tax expense Cost of sales 600 5. Sale of Plant - current period 14 000 1 000 300 100 Income tax expense Deferred tax asset Dr Cr 30 Retained earnings (1/7/16) Deferred tax asset Plant Dr Dr Cr 1 400 600 Accumulated depreciation Depreciation expense Retained earnings (1/7/16) (20% x $2000 p.a. for 1.5 years) Dr Cr Cr 600 Income tax expense Retained earnings (1/7/16) Deferred tax asset Dr Dr Cr 120 60 30 6. Sale of Inventory classified as Plant : prior period 2 000 400 200 180 7. Sale of Plant classified as Inventory: current period Proceeds on sale of plant Carrying amount of plant sold Cost of sales Dr Cr Cr 9 000 7 500 1 500 QUESTION 20.7 (cont'd) Fluffy Ltd 64 500 Glider Ltd 78 000 Cost of sales 30 900 46 350 Gross profit Trading expenses Office expenses Depreciation 33 600 4 800 7 950 1 800 31 650 9 000 4 050 3 900 14 550 19 050 9 000 16 950 14 700 15 000 7 500 14 000 1 500 1 000 20 550 11 100 15 700 7 300 Profit Retained earnings (1/7/16) 9 450 48 000 8 400 31 500 Retained earnings (30/6/17) Share capital BCVR 57 450 39 900 96 000 -- 66 000 -- Total equity 153 450 105 900 Current liabilities Deferred tax liability Total liabilities Total equity and liabilities 21 100 11 000 32 100 185 550 10 500 15 000 25 500 131 400 Sales revenue Profit from trading Proceeds from sale of plant Carrying amount of plant sold Gain/loss on sale of machinery Profit before tax Tax expense 3 3 1 5 7 Adjustments Dr Cr 21 000 4 500 21 000 4 200 600 1 500 600 100 400 Group 117 000 3 3 4 7 5 6 49 950 67 050 13 800 12 000 5 800 31 600 35 450 0 15 000 9 000 14 000 7 500 5 7 0 0 4 5 6 1 2 4 6 6 180 30 120 600 19 650 420 1 400 60 180 90 300 180 200 1 3 5 1 6 35 450 18 160 17 290 57 750 75 040 2 2 66 000 4 350 2 100 2 250 1 1 96 000 0 171 040 1 360 900 1 31 600 26 540 58 140 229 180 QUESTION 20.7 (cont'd) Fluffy Ltd 57 000 Glider Ltd 107 250 (18 300) (33 450) Intangibles Shares in Glider Ltd Deferred tax asset 12 000 90 000 8 100 11 100 9 450 Inventory Receivables Goodwill Total assets 28 500 8 250 0 185 550 24 600 12 450 0 131 400 Plant Accumulated depreciation 1 5 6 3 5 6 1 Adjustments Dr Cr 27 000 1 000 2 000 30 000 1 200 100 600 1 5 6 1 90 000 30 180 2 5 6 300 3 90 300 600 2 250 177 210 177 210 Group 134 250 (22 250) 23 100 0 18 330 52 800 20 700 2 250 229 180