Question 1 10 marks On 1 July 2015, Penny Ltd acquired all of the issued shares of Lane Ltd. As part of the settlement, Penny 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. Penny Ltd also issued 950,000 shares of Penny Ltd to the shareholders of Lane Ltd. At acquisition date, the fair value of the ordinary shares of Penny Ltd were $2.80 and the fair value of the ordinary shares of Lane Ltd were $5.00. Lane 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 Lane Ltd's net assets were recorded at fair value, except the following items: Carrying Amount Fair Value Plant $1,440,000 $1,800,000 Lane Ltd purchased the plant for $1,600,000. On 1 July 2015, the plant had an estimated remaining useful life of 10 years with zero residual value. Lane Ltd is depreciating the asset straight-line over its useful life. A contingent liability relating to an unsettled legal claim with a fair value of $100,000 was disclosed in the notes to Lane Ltd's financial statements at date of acquisition. The legal claim was settled on 1 April 2017 for $100,000. The directors of Penny Ltd believe that the goodwill relating to the acquisition of Lane Ltd was impaired by $250,000 during the year ended 30 June 2016. Both Penny Ltd and Lane 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