On 1 July 2017 Salah Ltd acquired 100% of the share capital (cum div.) of Robertson Ltd for $440,000. At that date, the relevant balances in the records of Robertson Ltd were:

	$
Share capital	300,000
General reserve	15,000
Retained earnings	70,000
Dividend payable	6,000

At the date of acquisition all assets and liabilities of Robertson Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets:

Carrying amount Fair value

$ $

Inventory 11,000 16,000

Equipment 39,000 55,000

Land 50,000 60,000

All inventory on hand at acquisition date was sold by 30 June 2018. Robertson Ltd revalued the land to fair value immediately after the acquisition in its accounting records. The cost of the equipment was $52,000 and had a further five (5) year life as at the date of acquisition.

Robertson Ltd disclosed a contingent liability in relation to a court case, which could potentially result in the company paying damages to a contractor. Salah Ltd calculated the fair value of this liability to be $14,000 at acquisition date. On 1 April 2020 Salah Ltd reassessed the fair value of the liability to be $6,000 as the chances of winning the case had improved, no amount has been paid.

Additional information:

1. During the year ending 30 June 2019, Robertson Ltd sold inventory to Salah Ltd for $18,000. The cost of inventory to Robertson Ltd was $11,000. 70% of this inventory was sold by Salah Ltd to external parties by 30 June 2019. The balance of the inventory was sold to external entities in November 2019 for $9,000.

2. During the year ending 30 June 2020, Robertson Ltd purchased inventory from Salah Ltd for $21,000, with Salah Ltd recording a before-tax profit of $8,000. By 30 June 2020, Robertson sold a quarter of this inventory to external entities.

3. On 1 January 2019, Robertson Ltd sold an item of equipment to Salah Ltd for $40,000. The original cost of the equipment to Robertson Ltd was $52,000 and had a carrying amount at the time of sale of $31,000. The equipment is depreciated at 20% p.a. straight-line.

4. All transfers from retained earnings to the general reserve by Salah Ltd and Robertson Ltd were from post-acquisition earnings.

5. On realisation of the business combination valuation reserve, a transfer is made to retained earnings on consolidation.

6. The tax rate is 30%.

The financial statements of the two companies at 30 June 2020 are as follows:

	Salah $	Robertson $
Revenues	840 000	520 000
Expenses	(630 000)	(400 000)
Net profit before tax	210 000	120 000
Income tax expense	(72 000)	(43 000)
Net profit after tax	138 000	77 000
Retained earnings 1 July 2019	190 000	140 000
	328 000	217 000
Dividend declared	(65 000)	(22 000)
Transfer to general reserve	(18 000)	(14 000)
Retained earnings 30 June 2020	245 000	181 000
Share capital	610 000	300 000
General reserve	51 000	62 000
Asset revaluation reserve	12 000	7 000
Accounts payable	43 000	15 000
Advance from Salah Ltd		75 000
Other liabilities	36 000	31 000
TOTAL EQUITY AND LIABILITIES	997 000	671 000
Cash	180 000	160 000
Accounts receivable	32 000	58 000
Prepayment	26 000	29 000
Inventory	99 000	100 000
Advance to Robertson Ltd	75 000
Investment in Robertson Ltd	434 000
Non-current assets	151 000	324 000
TOTAL ASSETS	997 000	671 000

Required:

Prepare the consolidation journal entries for the Salah Ltd group for the year ended 30 June 2020. (20 marks)

Acquisition Analysis

BCVR Journal Entries:

Intra-group Journal Entries:

Pre-Acquisition Journal Entries: