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MCO Ltd acquired 80% of the issued shares of PKP Ltd for $174,800 in 2018. MCO Ltd recorded a goodwill of $5,000 from the acquisition.

MCO Ltd acquired 80% of the issued shares of PKP Ltd for $174,800 in 2018. MCO Ltd recorded a goodwill of $5,000 from the acquisition.

(a)    At 30 June 2020, inventory of MCO Ltd included an item sold to it by PKP Ltd for a before-tax profit of $110. This item was found to be obsolete and written off in June 2021.

(b)     During the 2020–21 year, PKP Ltd had sold inventory to MCO Ltd for $28,900. The mark-up on sales was 20% on cost. At 30 June 2021, MCO Ltd still had some of this inventory on hand, amounting to items acquired from PKP Ltd for $2,400.

(c)     On 29 June 2021, PKP Ltd sold plant to MCO Ltd for a before-tax profit of $2,000. This plant was carried at $3,000 (original cost $20,000) in the records of PKP Ltd at time of sale.

(d)     The goodwill arising from the acquisition was impaired by $200 in the year ending 30 June 2020.

(e)     Financial information provided by PKP Ltd concerning events affecting it during the 2020–21 year was as follows:

Net Profit After Tax for the year

$27,500

Retained earnings at 1 July 2020

50,000

77,500

Dividend paid

(10,000)

Dividend declared

(3,000)

Transfer to general reserve

(1,500)

14,500

Retained earnings at 30 June 2021

$63,000

(f)        MCO Ltd and PKP Ltd depreciate their items of property, Plant & Equipment using 20% p.a. straight-line method.

(g)        Tax rate is 30%.

Required

Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements of MCO Ltd at 30 June 2021 in accordance to IFRS 10/AASB 10 Consolidated Financial Statements and IFRS 3/ AASB 3 Business Combinations. Workings and narrations are required.


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