On 1 July 20X1, Parent Ltd acquired 100% of the share capital of Subsidiary Ltd on a cum. div. basis for cash consideration of $880000. On 1 July 20X1, Subsidiary Ltd's assets and liabilities included a dividend payable of $6100. The dividend was paid on 3 August 20X1. On 1 July 20X1, the equity of Subsidiary Ltd consisted of: Share capital $790000 Retained earnings $51000 General reserve $35000 All identifiable assets and liabilities of Subsidiary Ltd were recorded at amounts equal to fair value at 1 July 20X1, except as follows: Carrying amount Fair Value Inventory $5600 $6900 Equipment $43000 $52000 On 1 July 20X1, Subsidiary Ltd's balance sheet included $3000 goodwill. This goodwill was written off as a result of an impairment test conducted in June 20X4. All the inventories acquired in the acquisition were sold by 30 June 20X2. w The equipment had an original cost of $82000 and accumulated depreciation of $39000. The equipment is expected to have a further useful life of 4 years and no residual value. The straight-line method of depreciation is used for all depreciable non-current assets. The equipment was sold on 30 June 2004 for $13000. Subsidiary Ltd. expensed all its outlays on research and development. Parent Ltd considered that an asset had been created by these expenditures with a fair value of $8400. This asset was to be amortized on a straight line basis over an expected useful life of 4 years with zero residual value. Subsidiary Ltd disclosed a contingent liability at 30 June 20X1 in relation to claims by customers for damaged goods. Parent Ltd placed a fair value of $3100 on these claims. The claims were settled by customers in May 20X2 for $3200. During the year anded on 30 June 20X3 Subsidiary Ltd transferred $10500 from general During the year ended on 30 June 20X3, Subsidiary Ltd transferred $10500 from general reserve to pre-acquisition retained earnings. During the year ended on 30 June 20X4, Subsidiary Ltd issued a bonus share dividend of $1700 from pre-acquisition retained earnings. Assume at tax rate of 30%. REQUIRED: NB: Round all dollar amounts to the nearest whole dollar. In situations where you believe no journal should be made, you need to (1) enter NULL for the account name, (2) NA in for the Dr or Cr column, and (3) enter O for the amount. DO NOT LEAVE THE DOLLAR AMOUNT BLANK. YOU MUST ENTERO FOR THE DOLLAR AMOUNT IF YOU BELIEVE NO ENTRY SHOULD BE MADE. (i) Prepare the acquisition analysis at 1 July 20X1. (i) Prepare the acquisition analysis at 1 July 20X1. Fair value of identifiable net assets of Subsidiary Ltd Consideration Transferred (ii) Prepare the business combination valuation entries in the consolidation journal at 1 July 20X1. (ii) Prepare the business combination valuation entries in the consolidation journal at 1 July 20X1. Business Combination Valuation Entries for Inventory Inventory Dr - Business combination valuation reserve Business Combination Valuation Entries for Equipment Dr Business Combination Valuation Entries for Equipment Dr Equipment - Business combination valuation reserve Business Combination Valuation Entries for Research & Development asset Dr Research & Development asset > . Business Combination Valuation Entries for Research & Development asset Research & Development asset Dr I Business combination valuation reserve Business Combination Valuation Entries for Customer claims liability Dr Deferred tax asset Dr cr Business Combination Valuation Entries for Goodwill Dr cr (iii) Prepare the pre-acquisition entries in the consolidation journal at 1 July 20X1. Dr Share capital Dr Retained earnings Dr General reserve On 1 July 20X1, Parent Ltd acquired 100% of the share capital of Subsidiary Ltd on a cum. div. basis for cash consideration of $880000. On 1 July 20X1, Subsidiary Ltd's assets and liabilities included a dividend payable of $6100. The dividend was paid on 3 August 20X1. On 1 July 20X1, the equity of Subsidiary Ltd consisted of: Share capital $790000 Retained earnings $51000 General reserve $35000 All identifiable assets and liabilities of Subsidiary Ltd were recorded at amounts equal to fair value at 1 July 20X1, except as follows: Carrying amount Fair Value Inventory $5600 $6900 Equipment $43000 $52000 On 1 July 20X1, Subsidiary Ltd's balance sheet included $3000 goodwill. This goodwill was written off as a result of an impairment test conducted in June 20X4. All the inventories acquired in the acquisition were sold by 30 June 20X2. w The equipment had an original cost of $82000 and accumulated depreciation of $39000. The equipment is expected to have a further useful life of 4 years and no residual value. The straight-line method of depreciation is used for all depreciable non-current assets. The equipment was sold on 30 June 2004 for $13000. Subsidiary Ltd. expensed all its outlays on research and development. Parent Ltd considered that an asset had been created by these expenditures with a fair value of $8400. This asset was to be amortized on a straight line basis over an expected useful life of 4 years with zero residual value. Subsidiary Ltd disclosed a contingent liability at 30 June 20X1 in relation to claims by customers for damaged goods. Parent Ltd placed a fair value of $3100 on these claims. The claims were settled by customers in May 20X2 for $3200. During the year anded on 30 June 20X3 Subsidiary Ltd transferred $10500 from general During the year ended on 30 June 20X3, Subsidiary Ltd transferred $10500 from general reserve to pre-acquisition retained earnings. During the year ended on 30 June 20X4, Subsidiary Ltd issued a bonus share dividend of $1700 from pre-acquisition retained earnings. Assume at tax rate of 30%. REQUIRED: NB: Round all dollar amounts to the nearest whole dollar. In situations where you believe no journal should be made, you need to (1) enter NULL for the account name, (2) NA in for the Dr or Cr column, and (3) enter O for the amount. DO NOT LEAVE THE DOLLAR AMOUNT BLANK. YOU MUST ENTERO FOR THE DOLLAR AMOUNT IF YOU BELIEVE NO ENTRY SHOULD BE MADE. (i) Prepare the acquisition analysis at 1 July 20X1. (i) Prepare the acquisition analysis at 1 July 20X1. Fair value of identifiable net assets of Subsidiary Ltd Consideration Transferred (ii) Prepare the business combination valuation entries in the consolidation journal at 1 July 20X1. (ii) Prepare the business combination valuation entries in the consolidation journal at 1 July 20X1. Business Combination Valuation Entries for Inventory Inventory Dr - Business combination valuation reserve Business Combination Valuation Entries for Equipment Dr Business Combination Valuation Entries for Equipment Dr Equipment - Business combination valuation reserve Business Combination Valuation Entries for Research & Development asset Dr Research & Development asset > . Business Combination Valuation Entries for Research & Development asset Research & Development asset Dr I Business combination valuation reserve Business Combination Valuation Entries for Customer claims liability Dr Deferred tax asset Dr cr Business Combination Valuation Entries for Goodwill Dr cr (iii) Prepare the pre-acquisition entries in the consolidation journal at 1 July 20X1. Dr Share capital Dr Retained earnings Dr General reserve