Please use the following information to prepare the

Business combination valuation entries and the pre-acquisition entries as at:

1 July 2017

30 June 2018

30 June 2019

30 June 2020

And must this layout to complete the solution worksheet

On 1 July 2017, EM Ltd made an offer to buy the 90% of the shares (cum div.) in SMS Ltd. The consideration for these shares consisted of 210,000 shares in EM Ltd valued at $2 per share plus a brand that was carried in the records of SMS Ltd at $20,000. The fair value of the Brand at the acquisition date was $24,000. EM Ltd had previously acquired 10% of the shares is SMS Ltd for $35,000. EM Ltd used the fair value method to measure this investment with movements in fair value being recognised in Prot and Loss Account. At 30 June 2017, this previous investment in SMS Ltd was recorded by EM Ltd at $43,500. The fair value of this investment on 1 July 2017 was estimated at $50,000. At the acquisition date (1 July 2017), SMS Ltd recorded a dividend payable of $15,000, goodwill of $3000 and equity at the following: I Share capital: $320,000 I General Reserve: $47000 o Retained Earnings: $90,000 In relation to the above acquisition, the following information is provided: 1. On the acquisition date, all the identiable assets and liabilities of SMS Ltd were recorded at fair value with the exception of: Carrying Amount Fair value Plant and Equipment (Cost $40,000) 23,000 28,000 Land 25,000 30,000 Inventory 27,000 3 5 ,000 2. In the notes to the nancial statements, SMS Ltd had reported the existence of a contingent liability in relation to claims by customers for damaged goods. EM Ltd placed a fair value of 4000 on these claims at the date of acquisition. The claims were later settled in May 2019 by SMS Ltd for $4500. 3. Plant and equipment held at acquisition is expected to have a further useful life of 4 years and the benefits expected to be derived uniformly over the life of the asset. This plant and equipment was later sold to an external party on 1 Feb 2020 at a gain of $8000. 4. The land identied on the acquisition date was also sold to an external party by SMS Ltd in February 2019 for $32,000. 5. In relation to the inventories held at 1 July 2017, SMS Ltd sold 85% of it to external parties by 30 June 2018 and the remainder by 30 June 2019. 6. The dividend payable by SMS Lid on acquisition was paid by September 2017. 7. On 30 June 2019, SMS Ltd distributed a dividend of $7500 from pre-acquisition retained earnings by issuing bonus shares. 8. SMS Ltd transferred $4500 and $4000 from retained earnings on hand at 1 July 2017 to general reserve in June 2019 and June 2020 respectively. The following intragroup transactions took place over the years: 1. On 1 Dec 2018, EM Ltd sold inventory to SMS Ltd for $40,000 on credit and recorded a profit of $5,000. Half of these inventories were sold to outside parties for $28,000 by 30 June 2019 and the remaining were sold by 30 June 2020. SMS Ltd paid 60% of the amount owed to EM Ltd on 10 March 2019 and the remaining on 10 July 2019. 2. On 1 July 2018, SMS Ltd sold a piece of equipment to EM Lid for $20,000. It had a carrying amount of $17,500 at the time of sale. SMS Ltd applied a rate of 10% p.a. as depreciation on cost, while EM Ltd applies a rate of 7.5% p.a. on cost. 3. On 1 October 2019, EM Ltd sold an item of inventory to SMS Lid for $12,000. This item had cost EM Ltd $8,500. SMS Ltd accounted this item as Plant and Equipment and charges depreciation at the rate of 10% p.a. on cost. 4. SMS Ltd rented a spare warehouse to EM Ltd starting from 1 Jan 2018 for 2 years. The initial charge for the rental was determined at $8,000 with a 10% increase in each year that follows. EM Ltd pays the yearly rental in advance to SMS Lid on 1 Jan each year. 5. SMS Ltd borrowed $10,000 from EM Ltd on 1 September 2017 for 1 year @5% interest p.a. The entire amount of the loan and the interest was paid by SMS Lid on 2 September 2018.Summarised Financial Statements as at 30 June 2020 EM Ltd SMS Ltd Sales Revenue 1,225,000 673,800 Cost of Sales -945,500 393,500 Gross Profit 279,500 280,300 Wages and Salaries -61,000 -48,500 Depreciation Expense -5,200 -6,500 Rental Expense -4,000 -2,400 Interest Expense -7,000 -1,200 Other Expenses -4,000 6,000 Total Expenses -81,200 -64,600 Gain on investments 25,000 0 Rental Revenue 2,400 4,000 Interest Revenue 2,350 8,500 Dividend Revenue 12,500 0 Profit before tax 240,550 228,200 Income tax expense 97,120 85,000 Profit after tax 143,430 143,200 EM Ltd SMS Ltd Share Capital 500,000 327,500 Retained Earnings 1/7/19 100,820 91,780 Profit for the year 143,430 143,200 Dividend Paid -10,000 -5,000 Dividend Declared -12,000 -7,500 Retained Earnings 30/6/20 222,250 222,480 General Reserve 135,000 76,000 Other Equity 1/7/19 4,000 12,000 Gains on financial assets 1,000 6,000 Other Equity 30/6/20 5,000 18,000 Loan from banks 9,000 Deferred Tax Liability 67,000 30,000 Dividend Payable 12,000 7,500 Total equity and liabilities 941,250 590,480 Shares in SMS Ltd 505,500 Cash 55,000 50,000 Inventories 168,000 69,480 Other Current Assets 11,000 300,000 Dividend Receivable 7,500 0 Deferred Tax Asset 10,450 3,250 Financial Assets 15,000 65,000 Plant and Equipment 152,000 145,000 Less Accumulated Depreciation -53,200 -65,250 Land 70,000 120,000 Goodwill 3,000 Total assets 941,250 690,480Consolidation worksheet entries 2 --- ITEM Ref Acquisition date AS AT 30. 06. 2018 AS AT 30. 06. 2019 AS AT 30. 06. 2020 3 BUSINESS COMBINATION VALUATION ENTRIES 4 je. g. Inventory 1 Inventory 1, 000 5 Inventory 1, 000 BCVR 700 pass journal entry for sale of inv BCVR 700 entry for inventory on acquisition sold in the previous year? DTL 300 DTL 300 (Being_inv measured at FV upon_acquisition (Being inv_measured_at FV_upon acquisition)_ (Being _inv on acquisition sold