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On 1 January 2020, Pink Limited acquired 30% of shares of Grey Limited and a total consideration of $1,800 million was paid on the same

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On 1 January 2020, Pink Limited acquired 30% of shares of Grey Limited and a total consideration of $1,800 million was paid on the same day. Pink Limited also appointed one of its founder and director to be a director of Grey Limited. Extracts of income statement of Grey Limited for the year ended 31 December 2020 were shown as follows: Profit before tax Tax Profit after tax Dividend-ordinary share Dividend-preference share Retained profit for the year $m 1,120 (310) 810 (500) (80) 230 Additional information: 1. Pink Limited sold goods amounting $1,400 million (Cost of sales is $1,000 million) to Grey Limited during the year ended 31 December 2020. At the year-end date, 50% of these goods remained in the storeroom of Grey Limited. 2. Dividends paid by Grey Limited ($500 million) to ordinary shareholders were out of profit earned during 2020. 3. Recoverable amount of goodwill at 31 December 2020 was $600 million. 4. As at 31 December 2020 the balances of ordinary shares and retained profit of Grey Limited were $1,300 million and $2,500 million respectively. 5. During the year, there were no changes in ordinary shares and preference shares. There were no significant differences between the carrying amount and fair value of the net assets of Grey Limited at 1 January 2020. Required: a) Provide the journal entries in the book of Pink Limited in respect of the acquisition of shares of Grey Limited and dividend received from Grey Limited for the year ended 31 December 2020. (4 marks) b) Provide the consolidated journal entries for Pink Limited for the year ended 31 December 2020. (15 marks) c) Based on your answer in (b), show an extract of Pink Limited's 2020 consolidated statement of financial position and provide the notes of disclosure for the investment in Grey Limited. (6 marks)

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