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On 1 July 2019, High Ltd acquired 80% of the share capital of Slow Ltd for $1,990,000.

At this date, the equity of Slow Ltd consisted of:

At 1 July 2019, all the identifiable assets and liabilities of Slow Ltd were recorded at fair value except for the following assets:

The inventory is sold by the 30 June 2020.

These assets are to be revalued on consolidation.

Financial information for these two companies at 30 June 2021 included:

Additional information

i. The transfer to General Reserve is from postacquisition profits.

ii. During the 201920 period, Slow Ltd sold some inventory to High Ltd for $78,000. This had originally cost Slow Ltd $46,000. These goods were on hand at the 30 June 2020. At 30 June 2021, only 10% of these goods remained unsold by High Ltd.

iii. The ending inventory of High Ltd included inventory sold to it by Slow Ltd at a profit of $32,000 before tax. This had cost Slow Ltd $112,000.

iv. On 1 January 2020, Slow Ltd sold an item of inventory to High Ltd for $750,000. This had originally cost Slow Ltd $640,000. High Ltd uses the item as a noncurrent asset (plant) and depreciates it on a straightline basis over a 5year period.

v. Slow Ltd purchased $36,000 of bonds issued by High Ltd. These bonds were issued on 1 January 2021, payable over 10 years with an interest rate of 4.0% per annum. Interest on the bonds is paid on 31 December of every year. Interest amounts owing for the period ended 30 June 2021 are recognised by both companies.

vi. During the financial year Slow Ltd incurred $14,350 for services performed by High Ltd for a review of the governance structures of the company. An amount of $4,350 from this amount is still outstanding at the end of the financial year.

vii. The Equity of Slow Ltd at the 30 June 2021 includes: Share Capital of $1,500,000, General Reserve of $610,000, and Revaluation Reserve of $115,000.

viii. Goodwill is impairmenttested every year. Goodwill has been impaired by $2,000 for the current year. No other impairment has been recorded for prior years.

ix. High Ltd uses the partial goodwill method.

x. The tax rate is 30%.

Required:

a) Show the acquisition analysis as at 1 July 2019 for the purchase of the shares in Slow Ltd by High Ltd. (Show only the calculation to determine any goodwill or gain).

b) Prepare appropriate Consolidation Journal Entries to consolidate the two companies for the financial year ended 30 June 2021. You must include narrations for the Consolidation Journal Entries and show supporting computations (where applicable).