Required:

Prepare the consolidation journal entries for the Salah Ltd group for the year ended 30 June 2020

Includ: Acquisition Analysis, BCVR Journal Entries, Pre-Acquisition Journal Entries, Intra-group Journal Entries

On 1 July 2017 Salah Ltd acquired 100% of the share capital (cum div.) of Robertson Ltd for $440,000. At that date, the relevant balances in the records of Robertson Ltd were: Share capital 300,000 General reserve 15,000 Retained earnings 70,000 Dividend payable 6,000 At the date of acquisition all assets and liabilities of Robertson Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets: Carrying amount Fair value $ $ Inventory 11,000 16,000 Equipment 39,000 55,000 Land 50,000 60,000 All inventory on hand at acquisition date was sold by 30 June 2018. Robertson Ltd revalued the land to fair value immediately after the acquisition in its accounting records. The cost of the equipment was $52,000 and had a further five (5) year life as at the date of acquisition. Robertson Ltd disclosed a contingent liability in relation to a court case, which could potentially result in the company paying damages to a contractor. Salah Ltd calculated the fair value of this liability to be $14,000 at acquisition date. On 1 April 2020 Salah Ltd reassessed the fair value of the liability to be $6,000 as the chances of winning the case had improved, no amount has been paid. Additional information: a) During the year ending 30 June 2019, Robertson Ltd sold inventory to Salah Ltd for $18,000. The cost of inventory to Robertson Ltd was $11,000. 70% of this inventory was sold by Salah Ltd to external parties by 30 June 2019. The balance of the inventory was sold to external entities in November 2019 for $9,000. b) During the year ending 30 June 2020, Robertson Ltd purchased inventory from Salah Ltd for $21,000, with Salah Ltd recording a before-tax profit of $8,000. By 30 June 2020, Robertson sold a quarter of this inventory to external entities. c) On 1 January 2019, Robertson Ltd sold an item of equipment to Salah Ltd for $40,000. The original cost of the equipment to Robertson Ltd was $52,000 and had a carrying amount at the time of sale of $31,000. The equipment is depreciated at 20% p.a. straight-line. d) All transfers from retained earnings to the general reserve by Salah Ltd and Robertson Ltd were from post-acquisition earnings. e) On realisation of the business combination valuation reserve, a transfer is made to retained earnings on consolidation. f) The tax rate is 30%. The financial statements of the two companies at 30 June 2020 are as follows: Revenues Expenses Net profit before tax Income tax expense Net profit after tax Retained earnings 1 July 2019 Salah $ 840 000 (630 000) 210 000 (72 000) 138 000 190 000 328 000 (65 000) (18 000) 245 000 610 000 51 000 12 000 43 000 Robertson $ 520 000 (400 000) 120 000 (43 000) 77 000 140 000 217 000 (22 000) (14000) 181 000 300 000 62 000 Dividend declared Transfer to general reserve Retained earnings 30 June 2020 Share capital General reserve Asset revaluation reserve Accounts payable Advance from Salah Ltd Other liabilities TOTAL EQUITY AND LIABILITIES 7 000 15 000 75 000 31 000 671 000 36 000 997 000 160 000 58 000 29 000 100 000 Cash Accounts receivable Prepayment Inventory Advance to Robertson Ltd Investment in Robertson Ltd Non-current assets TOTAL ASSETS 180 000 32 000 26 000 99 000 75 000 434 000 151 000 997 000 324 000 671 000