PART A CONSOLIDATED STATEMENT AND CASH FLOW

Question 1

Sham Ltd owns 100 per cent of the shares of Jackson Ltd, acquired on 1 July 2017 for $3.5 million when the shareholders funds of Jackson Ltd were:

Share capital	$1 750 000
Retained earnings	$1 400 000
	$3 150 000

All assets of Sham Ltd are fairly stated at acquisition date. The directors believe that there has been an impairment loss on the goodwill of $35 000 for the year ended 30 June 2018.

During the 2018 financial year, Jackson Ltd sells inventory to Sham Ltd at a sale price of $700 000. The inventory cost Jackson Ltd $420 000 to produce. At 30 June 2018, half of the inventory is still on hand with Sham Ltd. The tax rate is 28 per cent.

The financial statements of Sham Ltd and Jackson Ltd at 30 June 2018 are as follows:

	Sham Ltd ($000)	Jackson Ltd ($000)
Reconciliation of opening and closing retained earnings
Sales revenue	4 200	1 400
less Cost of goods sold	(1 750)	(490)
less Other expenses	(210)	(105)
Other revenue	245	87.50
Profit	2 485	892.50
Tax expense	696	250
Profit after tax	1 789	642.50
Retained earnings1 July 2017	3 500	1400
	5 289	2042.50
Dividends paid	700	140
Retained earnings30 June 2018	4 589	1 902.50
Statement of financial position Shareholders equity
Retained earnings	4 589	1 902.50
Share capital	14 000	1 750
Current liabilities
Accounts payable	350	297.50
Non-current liabilities
Loans	2 100	875
	21 039	4 825
Current assets
Cash	875	87.50
Accounts receivable	525	612.50
Inventory	2 100	1 050
Non-current assets
Land	5 044	1 500
Plant	8 645	1 400
Investment in Ltd	3 500
Future income tax benefit	350	175
Goodwill
	21 039	4 825

Required:

1. Prepare all the relevant adjusting journal entries.
2. Provide the consolidated worksheet showing all the eliminations, adjustments and consolidated statement for Sham Ltd and its controlled entity for the period ended 30 June, 2018.