On 1 July 2013, ICanDo This Ltd acquired (ex div.) all of the issued capital of IPass Ltd. The recorded equity of IPass Ltd at this date consisted of: Share capital $120 000 General reserve 25 000 Retained earnings 55 000 At 1 July 2013, all the identifiable assets and liabilities of IPass Ltd were recorded at fair value except for the following assets: Carrying Fair value amount Land $100 000 $130 000 Inventory 78 500 86 100 Machinery (cost $86 000) 52 000 56 000 Vehicles (cost $58 000) 47 000 53 000 Additionally, IPass Ltd.'s records showed a dividend payable at 1 July 2013 of $8000. This dividend was paid on 31 October 2013. The assets of IPass Ltd at acquisition date included goodwill recorded at $15 000 arising from a business combination transaction in 2009. At 1 July 2013, IPass Ltd owned but had not recorded an internally generated brand name. This brand name was considered by ICanDo This Ltd to have a fair value of $29 000 and an indefinite useful life. An impairment test conducted with respect to the brand name on 30 June 2016 concluded that its recoverable amount at that date was $2000 less than its carrying amount. The vehicles and machinery were expected to have a further useful life of 6 and 8 years respectively, with benefits to be received evenly over those periods. Inventory on hand at 1 July 2013 was all sold by 31 January 2014. The land owned at 1 July 2013 was sold in September 2014 for $150 000. The machinery on hand at 1 July 2013 was sold on 1 January 2016 for $38 000. Adjustments for the differences between carrying amounts and fair values of assets and liabilities on hand at acquisition date are recognised on consolidation. When assets are sold or derecognised, any related valuation reserves are transferred to retained earnings. In June 2015, IPass Ltd paid a share dividend worth $20 000 from the general reserve on hand at 1 July 2013. The trial balances of both companies at 30 June 2016 showed the following balances: Debit balances IPass Ltd ICanDoThis Ltd S 2 500 27 000 39 700 15 200 7 500 $ 1250 13 000 24 500 8 200 3 500 158 000 42 000 180 000 14 800 15 000 88 000 Cash Receivables Inventory Other current assets Deferred tax assets Vehicles Equipment Land Financial assets Goodwill Shares in IPass Ltd Debentures in ICanDoThis Ltd Dividend paid Dividend declared Transfer to general reserve Cost of sales Income tax expense Depreciation and other expenses Carrying amount of machinery sold Carrying amount of equipment sold 140 000 68 000 28 000 250 000 10 000 20 000 10 000 210 000 30 000 39 000 25 000 5 000 12 000 5 000 192 550 32 000 36 000 30 500 21 000 $1 005 900 $798 300 Credit balances IPass Ltd Share capital General reserve Retained earnings (1/7/15) Accounts payable Loan payable (due 30/6/20) Dividend payable Provisions Current tax liability Deferred tax liability Accumulated depreciation - vehicles Accumulated depreciation - equipment 8% Debentures (matures 30/6/19) Sales revenue Dividend revenue Other income Proceeds on sale of equipment Proceeds on sale of machinery ICanDoThis Ltd $ 200 000 35 000 51 300 69 500 25 000 20 000 12 500 43 000 11 800 16 400 25 000 450 000 17 000 11 400 18 000 $ 140 000 10 000 67 500 36 000 15 000 12 000 9 300 34 000 5 000 60 000 34 500 320 000 17 000 38 000 $798 300 $1 005 900 Additional information (a) Dividends may be declared by either company without shareholder approval. (b) The tax rate is 30%. (c) On 1 January 2016, ICanDoThis Ltd sold an item of equipment to IPass Ltd for $18 000. The equipment had a carrying amount at the date of sale of $21 000. Both companies depreciate equipment at 20% p.a. on a straight-line basis. (d) On 1 May 2015, IPass Ltd sold a machine to ICanDoThis Ltd for $7800. The machine had a carrying amount of $7000 at the date of sale. ICanDoThis Ltd recorded the machine as inventory. The inventory item was sold to an external party in November 2015 for $8200. (e) All interest on the 8% debentures has been paid and brought to account in the records of both companies. (f) During the 201516 financial year, ICanDoThis Ltd sold inventory to IPass Ltd for $75 000. The cost of this inventory to IPass Ltd was $70 000. Of this inventory, 25% is still on hand at 30 June 2016. (g) The transfer to general reserve recorded by IPass Ltd in the current year was from retained earnings recorded at 1 July 2013. Required Prepare the consolidation worksheet journal entries for the preparation of the consolidated financial statements of ICanDoThis Ltd at 30 June 2016. (Marks 30) On 1 July 2013, ICanDo This Ltd acquired (ex div.) all of the issued capital of IPass Ltd. The recorded equity of IPass Ltd at this date consisted of: Share capital $120 000 General reserve 25 000 Retained earnings 55 000 At 1 July 2013, all the identifiable assets and liabilities of IPass Ltd were recorded at fair value except for the following assets: Carrying Fair value amount Land $100 000 $130 000 Inventory 78 500 86 100 Machinery (cost $86 000) 52 000 56 000 Vehicles (cost $58 000) 47 000 53 000 Additionally, IPass Ltd.'s records showed a dividend payable at 1 July 2013 of $8000. This dividend was paid on 31 October 2013. The assets of IPass Ltd at acquisition date included goodwill recorded at $15 000 arising from a business combination transaction in 2009. At 1 July 2013, IPass Ltd owned but had not recorded an internally generated brand name. This brand name was considered by ICanDo This Ltd to have a fair value of $29 000 and an indefinite useful life. An impairment test conducted with respect to the brand name on 30 June 2016 concluded that its recoverable amount at that date was $2000 less than its carrying amount. The vehicles and machinery were expected to have a further useful life of 6 and 8 years respectively, with benefits to be received evenly over those periods. Inventory on hand at 1 July 2013 was all sold by 31 January 2014. The land owned at 1 July 2013 was sold in September 2014 for $150 000. The machinery on hand at 1 July 2013 was sold on 1 January 2016 for $38 000. Adjustments for the differences between carrying amounts and fair values of assets and liabilities on hand at acquisition date are recognised on consolidation. When assets are sold or derecognised, any related valuation reserves are transferred to retained earnings. In June 2015, IPass Ltd paid a share dividend worth $20 000 from the general reserve on hand at 1 July 2013. The trial balances of both companies at 30 June 2016 showed the following balances: Debit balances IPass Ltd ICanDoThis Ltd S 2 500 27 000 39 700 15 200 7 500 $ 1250 13 000 24 500 8 200 3 500 158 000 42 000 180 000 14 800 15 000 88 000 Cash Receivables Inventory Other current assets Deferred tax assets Vehicles Equipment Land Financial assets Goodwill Shares in IPass Ltd Debentures in ICanDoThis Ltd Dividend paid Dividend declared Transfer to general reserve Cost of sales Income tax expense Depreciation and other expenses Carrying amount of machinery sold Carrying amount of equipment sold 140 000 68 000 28 000 250 000 10 000 20 000 10 000 210 000 30 000 39 000 25 000 5 000 12 000 5 000 192 550 32 000 36 000 30 500 21 000 $1 005 900 $798 300 Credit balances IPass Ltd Share capital General reserve Retained earnings (1/7/15) Accounts payable Loan payable (due 30/6/20) Dividend payable Provisions Current tax liability Deferred tax liability Accumulated depreciation - vehicles Accumulated depreciation - equipment 8% Debentures (matures 30/6/19) Sales revenue Dividend revenue Other income Proceeds on sale of equipment Proceeds on sale of machinery ICanDoThis Ltd $ 200 000 35 000 51 300 69 500 25 000 20 000 12 500 43 000 11 800 16 400 25 000 450 000 17 000 11 400 18 000 $ 140 000 10 000 67 500 36 000 15 000 12 000 9 300 34 000 5 000 60 000 34 500 320 000 17 000 38 000 $798 300 $1 005 900 Additional information (a) Dividends may be declared by either company without shareholder approval. (b) The tax rate is 30%. (c) On 1 January 2016, ICanDoThis Ltd sold an item of equipment to IPass Ltd for $18 000. The equipment had a carrying amount at the date of sale of $21 000. Both companies depreciate equipment at 20% p.a. on a straight-line basis. (d) On 1 May 2015, IPass Ltd sold a machine to ICanDoThis Ltd for $7800. The machine had a carrying amount of $7000 at the date of sale. ICanDoThis Ltd recorded the machine as inventory. The inventory item was sold to an external party in November 2015 for $8200. (e) All interest on the 8% debentures has been paid and brought to account in the records of both companies. (f) During the 201516 financial year, ICanDoThis Ltd sold inventory to IPass Ltd for $75 000. The cost of this inventory to IPass Ltd was $70 000. Of this inventory, 25% is still on hand at 30 June 2016. (g) The transfer to general reserve recorded by IPass Ltd in the current year was from retained earnings recorded at 1 July 2013. Required Prepare the consolidation worksheet journal entries for the preparation of the consolidated financial statements of ICanDoThis Ltd at 30 June 2016. (Marks 30)