QUESTION 4

Extracts from the financial statements of Totem Ltd and Juneau Ltd at 30 June 2020 are as follows:

	Totem Ltd	Juneau Ltd
	$	$
Profit for the period	200,000	150,000
Retained earnings (1/7/19)	225,000	580,000
	425,000	730,000
Interim dividend paid	(45,000)	(25,000)
Dividend declared	(30,000)	-
	(75,000)	(25,000)
Retained earnings (30/6/20)	350,000	705,000
Share capital	900,000	300,000
Asset Revaluation reserve	225,000	250,000
Dividend payable	30,000	-

On 1 July 2017, Totem Ltd acquired 90% of the share capital of Juneau Ltd for $795,000. At this date, the financial statements of Juneau Ltd included the following items:

	$
Retained Earnings	280,000
Share Capital	300,000
Asset Revaluation Surplus	150,000

At 1 July 2017 all of the identifiable net assets of Juneau Ltd were recorded at fair value except for the following assets:

	Carrying amount	Fair value
	$	$
Inventory	120,000	150,000
Equipment (cost 280,000)	180,000	220,000

During the year ended 30 June 2018, all inventory on hand at 1 July 2017 was sold. Equipment had a further five-year life, with benefits expected to be received evenly over that time. Adjustments for differences between carrying amounts and fair values of assets at acquisition date are made on consolidation.

Additional information:

1. The partial goodwill method is used by Totem Ltd.
2. In February 2020, Juneau Ltd sold inventories for $55,000 to an external entity. These inventories were transferred from Totem Ltd on 1 May, 2019. The inventories had originally cost Totem Ltd $38,000, and were sold to Juneau Ltd for $45,000.
3. During the year ended 30 June 2020, Juneau Ltd sold inventory to Totem Ltd for $79,000 (cost price was $50,000). The inventory of Totem Ltd at 30 June 2020 included 60% of these goods purchased from Juneau Ltd.
4. The balance of the Asset Revaluation Surplus of Juneau Ltd at 1 July 2019 was $250,000.

The income tax rate is 30%.

Required:

On the following pages of this examination paper:

1. Prepare the consolidation worksheet general journal entries necessary for the preparation of the consolidated financial statements of Totem Ltd at 30 June 2020.

(Note: The worksheet and consolidated financial statements do not have to be prepared).

(38 marks)

Calculate the amount that would be disclosed in the consolidated financial statements at 30 June 2020 for Share Capital. Explain in detail the calculation.