Required:

Provide the acquisition analysis, and all the consolidation journals, including narrations, required for the preparation of the Pepper Group financial statements for the year ended 30 June 2019.

TOPIC 2. GROUP ACCOUNTING Ex. V. Group Accounting - ex 2019 Summer School Test 2 Pepper Limited owns 80 per cent of the shares of Salt Limited, acquired on 1 July 2018 for $600 when the shareholders' equity of Salt Limited consisted of Share Capital: $400 and Retained Earnings: $225 respectively. All assets and labilities of Salt Limited were fairly stated at acquisition date, expect plant, which was undervalued by $125. The directors believe that there has been an impairment loss on the goodwill of $100 in the year ended 30 June 2019. During the 2018 financial year, Pepper Limited sold inventory to Salt Limited at a selling price of $200. The inventory cost Pepper Limited $150 to produce. At 30 June 2019, all of the inventory was still on hand with Salt Limited. The income tax rate is 30 per cent. The financial statements of Pepper Limited and Salt Limited as at 30 June 2019 were as follows Pepper Ltd Salt Ltd Statement of Comprehensive Income Sales revenue Less: Cost of goods sold Gross profit Dividend income Other income Operating expenses Profit before tax Income tax expense Profit after tax Retained earnings - 1 July 2018 Dividends paid Retained earnings - 30 June 2019 8,400 (3,500) 4,900 224 210 (420) 4,914 (1,400) 3,514 7,000 1,120 9,394 2,800 (980) 1,820 0 175 (210) 1,785 (700) 1,085 2,800 (280) 3,605 Statements of Financial Position Cash Accounts receivable Inventory Property, plant and equipment Investment in Subsidiary Future income tax benefit (DTA) Total assets Current liabilities Accounts payable Non-current labilities (Loan) Share capital Retained earnings Total liabilities and shareholder's equity 2,474 770 4,200 27,350 7,000 300 42,094 110 1,000 2,100 5,600 0 350 9,160 700 4,200 28,000 9,394 42,294 315 1,750 3,500 3,605 9,160 TOPIC 2. GROUP ACCOUNTING Ex. V. Group Accounting - ex 2019 Summer School Test 2 Pepper Limited owns 80 per cent of the shares of Salt Limited, acquired on 1 July 2018 for $600 when the shareholders' equity of Salt Limited consisted of Share Capital: $400 and Retained Earnings: $225 respectively. All assets and labilities of Salt Limited were fairly stated at acquisition date, expect plant, which was undervalued by $125. The directors believe that there has been an impairment loss on the goodwill of $100 in the year ended 30 June 2019. During the 2018 financial year, Pepper Limited sold inventory to Salt Limited at a selling price of $200. The inventory cost Pepper Limited $150 to produce. At 30 June 2019, all of the inventory was still on hand with Salt Limited. The income tax rate is 30 per cent. The financial statements of Pepper Limited and Salt Limited as at 30 June 2019 were as follows Pepper Ltd Salt Ltd Statement of Comprehensive Income Sales revenue Less: Cost of goods sold Gross profit Dividend income Other income Operating expenses Profit before tax Income tax expense Profit after tax Retained earnings - 1 July 2018 Dividends paid Retained earnings - 30 June 2019 8,400 (3,500) 4,900 224 210 (420) 4,914 (1,400) 3,514 7,000 1,120 9,394 2,800 (980) 1,820 0 175 (210) 1,785 (700) 1,085 2,800 (280) 3,605 Statements of Financial Position Cash Accounts receivable Inventory Property, plant and equipment Investment in Subsidiary Future income tax benefit (DTA) Total assets Current liabilities Accounts payable Non-current labilities (Loan) Share capital Retained earnings Total liabilities and shareholder's equity 2,474 770 4,200 27,350 7,000 300 42,094 110 1,000 2,100 5,600 0 350 9,160 700 4,200 28,000 9,394 42,294 315 1,750 3,500 3,605 9,160