I'm struggle with a challenging exercise preparing for final exam, please show me how this question is tackled, it may costs 30% the quantity of knowledge related to exam so I get stuck with this one

On 1 July 2017, ABC Ltd acquired all the shares of XYZ Ltd, on a cum-div. basis, for $3,230,000. At this date, the equity of XYZ Ltd consisted of:

Share capital - 600 000 shares $1,200,000

General reserve 500,000

Retained earnings 900,000

At the acquisition date,XYZ Ltd reported a dividend payable of $50,000 and its assets included $100,000 of recorded goodwill. The dividend payable at the acquisition date was subsequently paid in August 2017.

On 1 July 2017, all the identifiable assets and liabilities of XYZ Ltd were recorded at amounts equal to fair value except for the following:

Carrying amount Fair value

Land $500,000 $650,000

Inventory 20,000 30,000

Plant (cost $350 000) 250 000 300,000

The land on hand at the acquisition date was sold in March 2018. Of the inventory on hand in XYZ Ltd at 1 July 2017, 60 percent was sold in November 2017 and the remainder was sold in July 2018. The plant was estimated to have a further 5-year life with zero residual value.

XYZ Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date, ABC Ltd calculated the fair value of this liability to be $30,000, even though XYZ Ltd had not recorded any provision for damages (liability). On 29 June 2019 XYZ Ltd reassessed the liability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2019 was considered to be $10,000.

The company applies the partial goodwill method. The income tax rate is 30%.

During the period 1 July 2017 to 30 June 2019, the following intra-group transactions have occurred between ABC Ltd and XYZ Ltd:

(T1) At 30 June 2019, ABC Ltd approved and declared a final dividend of $80,000 and XYZ Ltd approved and declared a final dividend of $50,000. XYZ Ltd subsequently paid its dividend on 20 August 2019.

(T2) On 1 October 2018, ABC Ltd issued 5,000 10% debentures of $100 at nominal value. XYZ Ltd acquired 1,000 of these. Interest is paid half-yearly on 31 March and 30 September. Accruals have been recognised in the legal entities' accounts

(T3) On 1 March 2019, XYZ Ltd sold equipment to ABC Ltd for $100,000. The equipment had an original cost of $150,000. At the time of sale, the carrying amount of the equipment was $80,000. XYZ Ltd had treated the asset as a depreciable non-current asset, being depreciated at 10% on cost, whereas ABC Ltd records the equipment as inventory. ABC Ltd sold this asset to Beanie Ltd on 15 June 2019 for $90,500.

(T4) On 1 January 2018, XYZ Ltd acquired furniture for $70,000 from ABC Ltd. The furniture had originally cost ABC Ltd $100,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit and, at 30 June 2018, $30,000 was outstanding. At 30 June 2019, $10,000 was still not paid and outstanding. Both entities apply depreciation on a straight-line basis. At 1 January 2018, the furniture had a further five years of useful life, with zero residual value.

(T5) On 3 December 2018, XYZ Ltd sold inventory to ABC Ltd for $96,000. The transfer price included a mark-up of 20% on cost. At 30 June 2019, 30 percent of this inventory was still on hand.

Requirement:

a) Prepare the acquisition analysis at 1 July 2017.

b) Prepare the consolidation worksheet entries at 30 June 2019. Your answer should include:

1.BCVR entries,

2.Pre-acquisition entries, and

3. Intragroup transaction adjustment entries (T1- T4)

Thank you for your consideration