Question 1 [20 marks]

Topic 1: Consolidation: Principles, accounting requirements

On 1 July 2017, Panda Ltd acquired all the issued shares of Smarty Ltd. Panda Ltd paid $250,000 more than the equity it acquired in the fair value of Smarty Ltds net assets. At the date of acquisition, the shareholders equity of Smarty Ltd was as follows.

	$
Share capital	100,000
Retained earnings	175,000
Total	275,000

All the assets and liabilities of Smarty Ltd were recorded at amounts equal to their fair values at the acquisition date, except for some assets detailed below.

	Remaining useful life	Cost	Carrying amount	Fair value
		$	$	$
Plant	5 years	180,000	90,000	120,000
Computer equipment	5 years	90,000	40,000	60,000

Required:

Prepare the acquisition analysis at 1 July 2017.

Prepare the consolidation worksheet entries for Panda Ltds group at 1 July 2017.

Prepare the consolidation worksheet entries for Panda Ltds group at 30 June 2018.