Question three On 1 July 2015 two companies. P Ltd and S Ltd, decided to combine with P Ltd issuing two shares (fair value $1 each) and $1 cash for each share in S Ltd The account balance of P Ltd and S Ltd at 1 July 2015, immediately after acquisition, were as follows: 5 Ltd Share capital - 500,000 500,000 -100,000 100,000 general reserve 100,000 25,000 Assets revaluation 75,000 20,000 Retained earnings 100,000 80,000 Tax liabilities 7,500 5,000 Other liabilities 275,500 10,000 1,040,000 240,000 Shares in 5 Ltd 380,000 - Land 200,000 100,000 Machinery 250,000 125,000 Accumulated deprecation (50,000) (25,000) Inventory 240,000 37,000 Cash 100,000 2,500 1,040,000 240,000 The assets and liabilities of S Ltd were recorded at fair values in 1 July 2015 except for Land 120,000 Machinery 115,000 inventory 42,500 In addition, acquisition date S Ltd had an unrecorded brand names with a fair value of $5,000. The tax rate is 30% The following events occurred in the four years following the acquisition: - The land was sold during the year ended 30June 2019 for $130,000