On 1 July 2022, Pine Ltd. acquired all the share capital of Island Ltd. for $250,000. At that date, Island
Ltd.’s equity consisted of the following:

Share Capital 100,000
General Reserve 20,000
Retained Earnings 30,000

On the date of acquisition, all the assets and liabilities of Island Ltd. were at fair value, except Land was
recorded at a cost of $100,000 but had a fair value of $120,000.

Relevant financial accounts of Pine Ltd. and Island Ltd. on 30 June 2023 are presented below:

Relevant Accounts Pine Ltd. Island Ltd.
Accumulated depreciation 110,500 22,000
Cash/Banks 70,540 54,000
Cost of sales 177,000 105,000
Deferred tax asset 82,060 5,000
Deferred tax liability 11,000 8,000
Depreciation expense 180,000 5,000
Dividend paid 81,000 16,500
Dividend payable 51,000 40,000
Dividend receivable 45,000 32,000

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Dividend revenue 14,500 50,000
Financial assets 20,000 -
Gain on financial assets 12,000 General reserve at 01/07/22 358,000 20,000
General reserve at 30/06/23 358,000 Income tax expense 38,000 38,700
Interest expense 5,000 1,400
Interest revenue 28,000 2,500
Inventories 110,000 80,000
Land 650,000 80,000
Loan payable 102,100 201,000
Loan receivable 250,000 -
Other components of equity at 01/07/22 10,000 -
Other components of equity at 30/06/23 20,000 Other current assets 32,000 11,000
Other expenses 2,500 3,400
Other revenue 500 55,000
Plant and equipment 890,000 55,000
Profit for the period 30,325 21,000
Retained earnings at 01/07/22 150,000 30,000
Retained earnings at 30/06/2023 7,000 106,500
Sales revenue 570,000 285,000
Service expense 40,000 Service revenue 120,000 Share capital at 01/07/22 1,600,000 100,000
Share capital at 30/06/23 1,600,000 Shares in Island Ltd. 250,000 -
Wages and salaries expenses 280,000 178,000


Additional information

1. On 1 January 2022, Pine Ltd. sold inventories to Island Ltd. for $45,000 on credit. The inventory
had originally cost $30,000. On 30 June 2022, Pine still had 65% of the inventory on hand and all
the receivables were outstanding. By 30 June 2023, all the remaining inventories were sold to third
parties and all receivables were paid.
2. On 1 March 2023, Island Ltd. sold inventories to Pine Ltd. for $9,000 cash. The inventory had
originally cost $4,000. On 30 June 2023, Pine Ltd. still had 20% of the inventory on hand.
3. On 1 November 2022, Island Ltd. borrowed $24,000 from Pine Ltd. at an annual interest rate of
2.5%. It is a 2-year interest-only loan with interest payable yearly. On 30 June 2023, all interest was
paid.
4. On 1 October 2022, Island Ltd. sold a machine to Pine Ltd. for $18,000 cash. The machine had
originally cost $15,000 and had a carrying amount of $3,000 at the time of the sale. Pine Ltd.
depreciates the asset at 10% per annum straight-line with a $1,000 residual amount. Island Ltd. had
been depreciating the asset at 5% per year on a straight-line basis with no residual.

5. On 30 June 2023, Pine Ltd. declared a dividend of $81,000. On the same day, Island Ltd. also
declared a dividend of $16,500. Pine Ltd recognises dividends when declared.
The tax rate is 30%.

Prepare the consolidated financial statements (including the consolidated income statement,
consolidated financial position and statement of changes in equity) for the period ended 30 June
2023.