On 1 July 2016, Gilberts Lid acquired all the issued shares (cum div .) of Potoroo Lid for $50 000. At this date the equity of Potoroo Lid consisted of: Share capital $25 000 Retained earnings 7 500 At this date, Potoroo Lid had recorded a dividend payable of $7500 which was paid in August 2016. All the identifiable assets and liabilities of Potoroo Lid were recorded at amounts equal to fair values except for inventory for which the fair value was $1000 greater than carrying amount. Only 10% of the inventory on hand at 1 July 2016 remained unsold by 30 June 2017. The tax rate is 30%. During the 2016-17 period, the following transactions occurred. Gilberts Ltd sold inventory to Potoroo Lid for $30 000 at a profit before tax of $6000. At 30 June 2017, inventory which was sold to Potoroo Lid for $12 500 at a profit before tax of $2500 was still on hand in the records of Potoroo Ltd. On 1 January 2017, Gilberts Ltd sold machinery to Potoroo Ltd at a gain of $5000. The machinery was considered to have a further 5-year life. During the period Potoroo Ltd rented a warehouse from Gilberts Ltd, paying $1250 in rent to Gilberts Ltd. During the period Gilberts Lid recorded gains from revaluation of land, which is measured using the fair value method. These gains increased the asset revaluation surplus by $2000 to give a balance of $14 000 at 30 June 2017. In June 2017, an impairment test was conducted on Potoroo Lid and resulted in the recognition of impairment losses on goodwill of $8000 (recognised in other expenses) The following financial information was provided by the companies at 30 June 2017: Gilberts Ltd Potoroo Ltd Sales revenue $62 500 $59 000 Dividend revenue 2 500 Other income 2 500 5 000 Gains on sale of non-current assets 2 500 5 000