On 1 July 2019, Dubbo Ltd purchased all the shares in Orange Ltd for $450,000. At this date, the shareholders equity of Orange Ltd consisted of share capital and retained earnings of $300,000 and $100,000 respectively.

On acquisition date, all the identifiable assets and liabilities of Orange Ltd were equal to their fair value except for the following assets:

	Carrying amount	Fair value
	$	$
Land	110,000	122,000
Equipment (cost $110,000)	85,000	97,500
Inventory	30,000	38,000

All the inventories held on 1 July 2019 were sold off to external parties by 30 June 2020. On 1 July 2019, the equipment has a further 5-year life and is depreciated on a straight-line basis.

On 1 June 2020, Dubbo Ltd sold inventories to Orange Ltd for $8,000, recording a profit of $2,000. 60% of these inventories were sold to external parties by 30 June 2020 and the remaining were sold off by 30 June 2021.

On 1 January 2021, Dubbo Ltd sold a motor vehicle to Orange Ltd for $20,000. The carrying amount of the motor vehicle is $16,000 at the time of sale. The motor vehicle is treated as inventory in Oranges books and still on hand on 30 June 2021.

During January to April 2021, Dubbo Ltd provided management services to Orange Ltd and charge $7,500 for the services. The amount due remained unpaid on 30 June 2021.

During May 2021, Orange Ltd declared a $5,000 which is paid in September 2021.

The company income tax rate is 30%.

Required:

Prepare an acquisition analysis in relation to the acquisition made by Dubbo Ltd. Prepare all necessary consolidation journal entries for the preparation of the consolidated financial statements for the year ended 30 June 2021.

Note: you are not required to prepare a consolidation worksheet, or the consolidated financial statements.

Marking guide:

	Max. marks allocated
Acquisition analysis	3
Consolidation journal entries	17
Total	20