The information below relates to Highflyer Ltd and Lowflyer Ltd.

On 30 June 2021, Highflyer Ltd acquired all of the issued shares of Lowflyer Ltd for $345,000. At the acquisition date the equity of Lowflyer Ltd consisted of:

Share capital $135,000

Reserves 115,000

Retained earnings 80,000

At the date of acquisition this equity reflected the fair values of all the identifiable assets and liabilities of Lowflyer Ltd with the exception of Inventory which had a fair value $3,000 greater than its carrying amount. The corporate tax rate is 32%.

Required: a) Prepare an analysis of the situation and also prepare the 30 June 2021 consolidation journal entries (with narrations) that are relevant to the above transactions and events for the books/records of the parent company. (9 marks)

b) On 30 June 2021, the drafted individual financial statements of both companies are given as below. Based on the adjustment entries you have provided, complete the consolidation worksheet for 30 June 2021 provided below. (13 marks)