Question Consolidated financial statements, method, acquisition, business combination valuation and intra-group transactions On 1 July 2017, Old Ltd acquired 100% of the share capital of School Ltd (cum div.) for $920,000. School Ltd's balance sheet on acquisition date included: Dividend payable $20,000 Retained earnings 180,000 Share capital 600,000 General reserve 40,000 At acquisition date, all of School Ltds net assets were recorded at fair value except for: Carrying amount Fair value Inventory $32,000 $40,000 Land 62,000 75,000 Contingent liability - 8,000 Buildings (Cost $100,000) 69,000 78,000 Additional Information: 1. The dividend payable at acquisition date was subsequently paid in August 2017. 2. The revalued inventory was sold during the year ended 30 June 2018. 3. The contingent liability identified on the acquisition of School Ltd still existed at 30 June 2020. 4. The revalued land was sold during the year ended 30 June 2020 for $52,000. 5. The revalued buildings were still held at 30 June 2020 being depreciated on the straight-line basis at 15% per year. 6. In May 2018, goodwill was impaired by $1,500. An additional $2,500 impairment occurred during the year ended 30 June 2020. 7. Management fee revenues earned by Old Ltd during the year ended 30 June 2020 were collected from School Ltd. 8. School Ltds inventory balance at 1 July 2019 included an item previously purchased from Old Ltd. This inventory had been sold by Old Ltd to School Ltd at a profit of $6,500. 9. During the year ended 30 June 2020, School Ltd sold a quantity of inventory to Old Ltd for $12,000. This inventory had originally cost School Ltd $8,000 with 30% of this inventory still being held by Old Ltd at 30 June 2020. 10. All dividends paid/declared by Old Ltd during the year ended 30 June 2020 were from post-acquisition profits. 11. Financial statements for the year ended 30 June 2020 are reproduced below: Old Ltd School Ltd Sales $6,320,000 $3,260,000 Cost of goods sold (3,060,000) (2,710,000) Gross profit 3,260,000 550,000 Dividend revenue 83,000 Interest revenue 18,000 Management fees revenue 22,000 Other income 30,000 Loss on sale of land (10,000) Depreciation expense (180,000) (86,000) Finance costs (91,000) (35,000) Other expenses (284,000) (33,000) Profit before income tax 2,840,000 404,000 Income tax expense (202,000) (88,000) Profit after tax 2,638,000 316,000 Retained earnings at (01/07/19) 695,000 322,000 Interim dividend paid (70,000) (22,000) Final dividend declared (140,000) (61,000) Retained earnings at (30/06/20) 3,123,000 555,000 Share capital 800,000 600,000 General reserve 210,000 40,000 Total equity 4,133,000 1,195,000 Trade and other payables 413,000 137,000 Dividend payable 140,000 61,000 Loan from School Ltd (6% per year, interest payable 31 December) 300,000 Mortgage loan 1,453,000 401,000 Deferred tax liabilities 90,000 Total liabilities 2,396,000 599,000

Total liabilities and equity 6,529,000 1,794,000 Cash 194,000 115,000 Trade and other receivables 72,000 35,000 Dividends receivable 61,000 Inventory 750,000 438,000 Land 770,000 250,000 Buildings 1,747,000 770,000 Accumulated depreciation buildings (320,000) (454,000) Plant and equipment 2,790,000 450,000 Accumulated depreciation plant and equipment (435,000) (110,000) Investment in School Ltd 900,000 Loan to Old Ltd (6% per year, interest payable 31 December) 300,000 Total assets 6,529,000 1,794,000 Required: 1. Determine the gain on bargain purchase or goodwill as at acquisition date. 2. Prepare the consolidation journal entries for Old Ltd immediately after acquisition on 1 July 2017. 3. Prepare the consolidation journal entries for Old Ltd as at 30 June 2020.