Question On 1 July 2013, Rock Ltd acquired (ex div.) all of the issued capital of Wallaby Ltd. The recorded equity of Wallaby Ltd at this date consisted of: Share capital $120 000 General reserve 25 000 Retained earnings 55 000 At 1 July 2013, all the identifiable assets and liabilities of Wallaby Ltd were recorded at fair value except for the following assets:  Carrying amount  Fair value Land $100 000 $130 000 Inventory 78 500 86 100 Machinery (cost $86 000) 52 000 56 000 Vehicles (cost $58 000) 47 000 53 000 Additionally, Wallaby Ltd's records showed a dividend payable at 1 July 2013 of $8000. This dividend was paid on 31 October 2013. The assets of Wallaby Ltd at acquisition date included goodwill recorded at $15 000 arising from a business combination transaction in 2009. At 1 July 2013, Wallaby Ltd owned but had not recorded an internally generated brand name. This brand name was considered by Rock Ltd to have a fair value of $29 000 and an indefinite useful life. An impairment test conducted with respect to the brand name on 30 June 2016 concluded that its recoverable amount at that date was $2000 less than its carrying amount. Adjustments for the differences between carrying amounts and fair values of assets and liabilities on hand at acquisition date are recognised on consolidation. When assets are sold or derecognised, any related valuation reserves are transferred to retained earnings. In June 2015, Wallaby Ltd paid a share dividend worth $20 000 from the general reserve on hand at 1 July 2013. The trial balances of both companies at 30 June 2016 showed the following balances: The vehicles and machinery were expected to have a further useful life of 6 and 8 years respectively, with benefits to be received evenly over those periods. Inventory on hand at 1 July 2013 was all sold by 31 January 2014. The land owned at 1 July 2013 was sold in September 2014 for $150 000. The machinery on hand at 1 July 2013 was sold on 1 January 2016 for $38 000. Debit balances Rock Ltd Wallaby Ltd Cash $2 500 $ 1 250 Receivables 27 000 13 000 Inventory 39 700 24 500 Other current assets 15 200 8 200 Deferred tax assets 7 500 3 500 Vehicles 88 000 158 000 Equipment  42 000 Land 140 000 180 000 Financial assets 68 000 14 800 Goodwill 28 000 15 000 Shares in Wallaby Ltd 250 000  Debentures in Rock Ltd  25 000 Dividend paid 10 000 5 000 Dividend declared 20 000 12 000 Transfer to general reserve 10 000 5 000 Cost of sales 210 000 192 550 Income tax expense 30 000 32 000 Depreciation and other expenses 39 000 36 000 Carrying amount of machinery sold   30 500 Carrying amount of equipment sold 21 000   $1 005 900  $798 300 Credit balances Rock Ltd Wallaby Ltd Share capital $ 200 000 $ 140 000 General reserve 35 000 10 000 Retained earnings (1/7/15) 51 300 67 500 Accounts payable 69 500 36 000 Loan payable (due 30/6/20) 25 000 15 000 Dividend payable 20 000 12 000 Provisions 12 500 9 300 Current tax liability 43 000 34 000 Deferred tax liability 11 800 5 000 Accumulated depreciation - vehicles 16 400 60 000 Accumulated depreciation - equipment  34 500 8% Debentures (matures 30/6/19) 25 000  Sales revenue 450 000 320 000 Dividend revenue 17 000  Other income 11 400 17 000 Proceeds on sale of equipment 18 000  Proceeds on sale of machinery   38 000 $1 005 900 $798 300