Question 1 On 1 July 2016, Cena Ltd acquired 80% of the shares of Lesnar Ltd for $40 000. The following balances appeared in the records of Lesnar Ltd at this date:

Share Capital $20 000

General Reserve 2 000

Retained Earnings 10 000

At 1 July 2016, all the identifiable assets and liabilities of Lesnar Ltd were recorded at fair value except for the following:

Carrying amount Fair value

Machinery (cost $36 000) $30 000 $40 000

Inventory 16 000 20 000

Receivables 20 000 18 000

The machinery, which had a remaining useful life of 5 years, was adjusted to fair value after the acquisition date in the consolidation worksheet. The machinery was sold by Lesnar Ltd on 1 January 2021 for $4000, with the related valuation reserve being transferred on consolidation to retained earnings. By 30 June 2017, receivables had all been collected and inventory sold. For the year ended 30 June 2021, the following information is available:

a) Intragroup sales were:

Lesnar Ltd to Cena Ltd - $40 000. The mark-up on cost of all sales was 25%. At 30 June 2021, inventory of Cena Ltd included $2000 of items acquired from Lesnar Ltd.

b) At 30 June 2020, inventory of Cena Ltd included goods of $1000 resulting from a sale on 1 March 2020 of non-current assets by Lesnar Ltd at a before-tax profit of $200. These items were sold by Cena Ltd on 1 September 2020. This class of non-current assets is depreciated using a 10% depreciation rate on a straight-line basis.

c) On 1 January 2021, Lesnar Ltd sold an item of plant to Cena Ltd for $2000 at a before-tax profit of $800. For plant assets, Lesnar Ltd applies a 10% p.a. straight line depreciation rate, and Cena Ltd uses a 5% p.a. straight-line method.

d) The current tax rate is 20%.

Financial information for the year ended 30 June 2021 includes the following:

Cena Ltd$ Lesnar Ltd$

Sales revenue 88 000 52 000

Other revenue 12 000 8 000

Total revenue 100 000 60 000

Cost of sales 58 000 26 000

Other expenses:

Selling and administrative (including depreciation) 4 000 2 000

Financial 2 000 1 000

Carrying amount of non-current assets sold 6 000 5 000

70 000 34 000

Gross profit 30 000 26 000

Dividend revenue 3 000 0

Profit before tax 33 000 26 000

Income tax expense 13 200 10 400

Profit 19 800 15 600

Retained earnings at 1 July 2020 40 000 20 000

59 800 35 600

Transfer to general reserve 3 800 1 000

Interim dividend paid 4 000 8 000

Final dividend declared 4 000 4 000

11 800 13 000

Retained earnings at 30 June 2021 $48 000 $22 600

Asset revaluation reserve (1/7/20) 3 000 2 000

Gains on property revaluation 1 000 5 00

Asset revaluation reserve (30/6/21) $4 000 $2 500

Required: Prepare the acquisition analysis and consolidation worksheet journal entries for the preparation of the consolidated financial statements of Cena Ltd at 30 June 2021 using the partial goodwill