Question 4 20 Marks

On 1 July 2021, Christmas Ltd acquired the remaining 85% of the issued shares that it did not previously own in Max Ltd, transferring 450,000 Christmas Ltd shares to Max Ltds former shareholders. At that date, the financial statements of Max Ltd showed the following information.

Share capital	$ 500,000
General reserve	120,000
Retained earnings	360,000

All the assets and liabiliies of Max Ltd were recorded at amounts equal to their fair values at the acquisition date. The fair value of Christmas Ltds shares at acquisition date was $2.00 per share. The previously held interest by Christmas Ltd in Max Ltd (i.e. 25% of the issued shares) was recognised in Christmas Ltds accounts at the fair value at acquisition date of $325,000. Christmas Ltd incurred $25,000 in acquisitionrelated costs, including $30,000 in share issue costs.

Required

1. Prepare the acquisition analysis at 1 July 2021.(5 marks)
2. Prepare the journal entries for Christmas Ltd to recognise the additional investment in Max Ltd at 1 July 2021. (5 marks)
3. Prepare the consolidation worksheet entries for Christmas Ltds group at 1 July 2021. (10 marks)