Question 3 (25 marks) King Ltd owns all the shares of Smith Ltd. The shares were acquired on 1 July 2018 by King Ltd at a cost of $720,000. At the acquisition date, the capital of Smith Ltd consisted of 100,000 ordinary shares each fully paid at $3. There were retained earnings of $120,000. All the identifiable assets and liabilities of Smith Ltd were recorded at amounts equal to fair value except for the following: Carrying Amount Fair Value Patent $20,000 $35,000 Land $110,000 $150,000 Machinery (cost $200,000) $160,000 $170,000 MACOO6 Trimester 2 2021 FEX Page 3 of 8 Patent and land had both been sold in 2019. Machinery has been depreciated at a rate of 10% a year Additional Information: 1. Intragroup sales of inventory for the year ended 30 June 2020 was $50,000. On 30 June 2020, inventory held by King was purchased from Smith at a profit of $5000, 50% of the stock is on hand 2 On 1 July 2019, inventory held by Smith Lid was purchased from King in the previous year at a profit of $6000.0% of the stock is on hand at 30 June 2020 Print Layout View Pages: 3 of 6 Words: 275 of 691 TAK VI 1486096_EVINAHLONGANGI.docx 1 100% a Redo Format Tables Columns Show Navigation Gallery Toolbox Zoom Help Document Elements Quick Tables Charts SmartArt Graphics WordArt 12 ab 1h 12 112 15 16 Patent and land had both been sold in 2019. Machinery has been depreciated at a rate of 10% a year Additional Information: 1. Intragroup sales of Inventory for the year ended 30 June 2020 was $50,000. On 30 June 2020, Inventory held by King was purchased from Smith at a profit of $5000. 50% of the stock is on hand 2. On 1 July 2019, Inventory held by Smith Lod, was purchased from King in the previous year at a profit of $6000.0% of the stock is on hand at 30 June 2020 3. Intragroup machinery on hand on 30 June 2020 - King Lid purchased from Smith Ltd on 1 July 2019 for $30,000 at a profit of $3.000. Depreciation rate is 20% per year 4 Smith Lid had purchased from King Ltd an item of inventory. The carrying amount in King's records at time of sale (1 Jan 2019) was $10,000 and it was sold at a profit of 54.000 The inventory is still on hand as at 30 June 2020 Required: Prepare all journal entries required for consolidation of King Group Lid for the year orded 30 June 2020. Show al calculations necessary. Consolidation workshoot is not required Anwar and how wordings here) 3 4 of 6 Words 33 of 601 LTH 6 A