On 1 July 2011, Parent Ltd acquired 100% of the share capital of Son Ltd for $ 1,000,000. At that time, the equity of Son Ltd consisted of:

Share capital

$ 600,000

General reserve

170,000

Retained earnings

80,000

All the identifiable assets and liabilities of Son Ltd were recorded at fair value except for:

Carrying Amount

Fair Value

Land

$ 550,000

$ 600,000

Plant and equipment

$ 395,000

$ 435,000

On 1 July 2011, the plant and equipment had a further five-year life and was expected to be used evenly over that time. It originally cost $600,000, and had accumulated depreciation of $205,000 at 1 July 2011. The land on hand at acquisition date was sold to a third party in March 2015. The goodwill was impaired by $8,700 on 30 June each year since acquisition.

Tax rate is 30%.

The following intra-group transactions have taken place:

(T1) On 10 June 2015, Son Ltd paid $60,000 to Parent Ltd for services rendered.

(T2) During the year ended 30 June 2014, Son Ltd sold inventory to Parent Ltd for $90,000. The inventory originally cost $80,000, and half was sold to a third party by 30 June 2014. The inventory has since been sold to a third party during the year ending 30 June 2015.

(T3) During the year ended 30 June 2015, Son Ltd sold inventory to Parent Ltd for $108,000. There was a $16,000 mark-up on the cost. All inventory remains on hand at 30 June 2015.

(T4) On 1 July 2012, Parent Ltd sold computers to Son Ltd for $50,000. At the time of transfer, the computers had a carrying amount of $44,000 in the books of Parent Ltd. The computers have five years of life remaining (For depreciation of non-current assets, Parent Ltd and Son Ltd use straight line method).

(T5) On 1 March 2015, Son Ltd sold equipment to Parent Ltd for $55,000, this asset having a carrying amount at the time of sale of $46,000. Son Ltd had treated the asset as a depreciable non-current asset, being depreciated at 15% on cost, whereas Parent Ltd records the equipment as inventory. Parent Ltd sold this asset to a third party on 12 June 2015 for $61,500.

(T6) On 1 January 2015, Son Ltd acquired furniture for $45,000 from Parent Ltd. The furniture had originally cost Parent Ltd $62,000 and had a carrying amount at the time of sale of $48,000. The sale was made on credit and, at 30 June 2015, $4,500 was still outstanding. Both entities apply depreciation at a rate of 10% p.a. straight line.

Required:

(a)Prepare acquisition analysis at 1 July 2011.

(b)Prepare the revaluation and pre-acquisition journal entries at 30 June 2015.

(c)Prepare the consolidation journal entries for intra-group transactions at 30 June 2015.