Princess Ltd acquired 90% of the issued shares of Karen Ltd on 1 January 2016. The following were incurred by Princess Ltd in the acquisition of Karen Ltd:

1. An issuance of 10,000 Princess Ltd’s shares to Karen’s shareholders. The market value of its shares is $2 per share.
2. Cash payment of $20,000 to Karen Ltd’s shareholders.
3. Cash payment of $5,000 for professional services relating to the business combination.

At the acquisition date, the statement of financial position of Karen Ltd and fair value adjustments to its assets and liabilities are as follows:

Princess Ltd acquired 90% of the issued shares of Karen Ltd on 1 January 2016. The following were incurred by Princess Ltd in the acquisition of Karen Ltd:

1. An issuance of 10,000 Princess Ltd’s shares to Karen’s shareholders. The market value of its shares is $2 per share.
2. Cash payment of $20,000 to Karen Ltd’s shareholders.
3. Cash payment of $5,000 for professional services relating to the business combination.

At the acquisition date, the statement of financial position of Karen Ltd and fair value adjustments to its assets and liabilities are as follows:

	Book value	Fair value
Fixed assets	20,000	21,000
Brand		8,000
Inventory	10,000	12,000
Accounts receivable	7,000	7,000
Allowance for impairment		(500)
Cash	2,000	2,000
	39,000
Accounts payable	6,000	6,000
Contingent liability	-	2,000
Share capital	10,000
Retained profits	23,000
	39,000

Karen did not recognise the fair value adjustment in its books.

Additional information

a)    The fixed assets have a useful life of 10 years as at 1 January 2016, with zero residual value. The straight-line method is used.

b)    Inventory as at 1 January 2016 was sold to third parties during the year.

c)    In 2017, the impaired debts provided and the contingent liability were actualized, and recognised as expenses in the books of Karen Ltd.

d)    Ignore the effects of taxation from fair value adjustments

Required:

1. Given that the profits of Karen are $20,000 and $10,000 for 2016 and 2017 respectively, show the consolidation journal entries for 2016 and 2017.

2. Given that the profits of Princess are $20,000 for 2017, calculate the consolidated profit attributable to shareholders for 2017.