On 1 July 20x1,ParentLtd acquired 100% of the share capital ofSubsidiaryLtd for cash consideration $820000, cum div based. On 1 July 20x1, Subsidiary Ltd's assets and liabilities included a dividend payable of $7000. The dividend was paid on 3 August 20x1. Assume a tax rate of 30%.

On 1 July 20x1, the equity of Subsidiary Ltd consisted of:

Share capital ($)720000Retained earnings ($)54500General reserve ($)31500

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 ($)Fair value($)Inventory57007100Equipment84000Accumulate depreciation(48000)3600052000

On 1 July 20x1, Subsidiary Ltd's balance sheet included $3900 goodwill.

All the inventories acquired in the acquisition were sold by 30 June 20x2.

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 20x4 for $14000.

Subsidiary Ltd. had expensed all its outlays on research and development. Parent Ltd considered that an asset was created and placed a fair value of $7000on this asset.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 also had reported a contingent liability at 30 June 20x1 in relation to claims by customers for damaged goods.Parent Ltd placed a fair value of $5200 on these claims.The claims were settled by customers in May 20x2 for $3500.

During the year ended on 30 June 20x3, Subsidiary Ltd transferred $6800from pre-acquisition retained earnings to general reserve.

During the year ended on 30 June 20x4, Subsidiary Ltd issued a bonus share dividend of $7600from pre-acquisition retained earnings.