On 1 Jan 2018, A Ltd acquired all the outstanding shares of B Ltd when the equity of B Ltd consisted of share capital (10,000 shares) of $10,000 and retained earnings of $5,000. Details of the acquisition are as follows.

1. A Ltd paid $10,000 cash by two instalments: $6,000 on 1 Jan 2018 and the remaining on 1 Jan 2020. The incremental borrowing rate is 6%.
2. A Ltd issued 5,000 shares of its own in exchange for all shares in B Ltd when the market price was $2 per share on the issuing date.
3. Due to doubts as to whether the share price of A Ltd could remain at or above the $2 level for 3 months, A Ltd agreed to compensate B Ltd the value of any decrease in the share price below $2. At the time of acquisition, A Ltd estimated a 30% chance that its share price would fall to $1.80 by 31 Mar 2018.
4. A Ltd supplied to B Ltd a self-developed patent worth $500.

4. On the date of acquisition, B Ltd had an unrecorded liability arising from a lawsuit with the expected loss of $10,000. However, the lawyer estimated that there was a 40% chance of losing the case.
5. On the date of acquisition, B Ltd had an unrecorded patent of $3,000 (fair value).
6. A Ltd paid $10,000 share issuance costs and $8,000 consulting and brokerage fees in relation to acquisition.

At the acquisition date, B Ltds assets and liabilities were recorded as fair value except for the following:

	Carrying amount	Fair value
Land	$ 4,000	6,800
Plant (original cost $6,000)	5,500	8,500
Inventory	5,000	6,000
Goodwill	1,000	-

The land was sold in May 2019 for $7,500. The plant had a further 5-year life. Eighty percent of the undervalued inventory were sold in 2018 and the remaining amount was sold in 2019. Tax rate is 30%.

Additional information: A Ltds share price remained above $2 per share on 31 Mar 2018; B Ltd has not settled the contingent liability by 31 Dec 2019; and no amortization was charged on the unrecorded patent and no impairment loss on goodwill since acquisition. Financial statements of the two firms at 31 Dec 2019 are as follows.

Profit (loss) before gain, depreciation and tax	A Ltd $ 4,000		B Ltd $ (1,450)
Gain on sale of land	-		3,500
Depreciation expense	(800)		(250)
Income tax expense	(1,300)		(240)
Profit for the year	1,900		1,560
Retained earnings (1/1/2019)	11,629		5,600
	13,529		7,160
Dividend	(500)		-
Retained earnings (31/12/2019)	13,029		7,160
Share capital	25,000		10,000
Contingent liability	1,000		-
Deferred tax liability	600		300
Other liabilities	3,400		1,000
Total equity and liabilities	$ 43,029		$ 18,460
Land	$ 6,600		$ 5,100
Plant	12,000		8,000
Accumulated depreciation	(2,000)		(1,000)
Patent	-		500
Deferred tax asset	300		100
Inventory	3,000		2,000
Cash	3,069		2,760
Shares in B Ltd	20,060
Goodwill	-		1,000
Total Assets	$ 43,029		$ 18,460

Required

1. Calculate A Ltds cost of investment in B Ltd on the acquisition date. (4 marks)
2. Calculate the amount of goodwill involved on the acquisition date. (6 marks)
3. Prepare consolidation worksheet entries at 1 Jan 2018. (22 marks)
4. Prepare consolidation worksheet entries at 31 Dec 2018. (26 marks)
5. Prepare consolidation worksheet entries at 31 Dec 2019. (27 marks)
6. Prepare the consolidation worksheet at 31 Dec 2019. (30 marks)
7. Prepare consolidated statement of profit or loss for the year ended 31 Dec 2019 and consolidated statement of financial position as at 31 Dec 2019. (5 marks).