On 1 July 2015, Candy Ltd acquired all of the issued shares of Sweet Ltd. As part of the settlement, Candy Ltd agreed to pay $3,500,000 on 1 July 2015 and $1,650,000 payable on 1 July 2016. The appropriate discount rate was 10% per annum. Candy Ltd also issued 950,000 shares in Candy Ltd to the shareholders in Sweet Ltd. At acquisition date, the fair value of the ordinary shares in Candy Ltd were $2.80 and the fair value of the ordinary shares in Sweet Ltd were $5.00. Sweet Ltd.’s shareholders’ equity on 1 July 2015 consisted of the following: Issued capital $3,800,000 Retained earnings $1,200,000 Total shareholders’ equity $5,000,000 At 1 July 2015, all of Sweet Ltd.’s net assets were recorded at fair value, except the following items: Carrying Amount Fair Value Land $2,000,000 $2,700,000 Plant $1,440,000 $1,800,000 

 Sweet Ltd purchased the land on 1 July 2012 for $2,000,000. The land was sold for $3,200,000 on the 1 June 2018.

 Sweet Ltd purchased the plant on 1 July 2014 for $1,600,000. On 1 July 2015, the plant had an estimated useful life of 10 years with zero residual value. Sweet Ltd is depreciating the asset straight-line over its useful life. There is no change to the estimated useful life of the plant at date of acquisition. 

 A contingent liability relating to an unsettled legal claim with a fair value of $100,000 was disclosed in the notes to Sweet Ltd.’s financial statements at date of acquisition. The legal claim was settled on 1 April 2017 for $100,000. 

 Both Candy Ltd and Sweet Ltd use the cost model for the valuation of assets, so any fair value adjustments will be completed as consolidation adjustments. 

 The company income tax rate is 30% Required: Based on the information provided, prepare an acquisition analysis and complete all necessary consolidation elimination and adjustment entries required as at 30 June 2018 in accordance with AASB 10 Consolidated Financial Statements. Show all workings provided in the answer booklet. 

 Include all narrations. 

 Show all workings. Where workings are not shown, part marks will not be awarded.