On 1 July 2020 Mango Ltd acquired all the issued shares (cum div.) of Cream Ltd for $450,000. At date of acquisition the equity of Cream was recorded at:

• Share Capital $200,000
• Reserves $100,000
• Retained earnings $100,000

The fair value of land was $220,000 (carrying amount $200,000).

The fair value of equipment was $230,000 (cost $240,000 and carrying amount $210,000).

On this date the records of Cream Ltd showed goodwill at cost of $10,000 and dividends payable of $15,000. All other assets and liabilities were carried at amounts equal to fair values.

The land was sold on 1 January 2021 and equipment has a useful life of 5 years.

The dividend was paid on 31 August 2020.

Assume a tax rate of 30%

Required:

1. Prepare the acquisition analysis to determine goodwill or gain on bargain purchase on 1 July 2020. (3 Marks)
2. Prepare the consolidation worksheet entries immediately after the combination on 1 July 2020. (5 Marks)
3. Prepare the consolidation entries for the equipment on 30 June 2021. (2 Marks)