The question is to prepare the consolidation journal entries as of 30 june 2017 with the following info.

On 1 July 2015, Holdthe Ltd acquired all the issued shares of Door Ltd. Holdthe Ltd paid $30,000 in cash and 20,000 shares in Holdthe Ltd valued at $3 per share. At this date, the equity of Door Ltd consisted of $66,000 share capital and $6,000 retained earnings.

At 1 July 2015, all the identifiable assets and liabilities of Door Ltd were recorded at amounts equal to their fair values except for:

Plant (cost $150000): CA $120000 FV $122000

Patents: CA $90000 FV $105000

Inventory CA $18000 FV $22500

The plant was considered to have a further 5-year life. The patents were sold for $120,000 to an external entity on 18 August 2015. The inventory was all sold by 30 June 2016.

Additional information:

(a) Holdthe Ltd sells certain raw materials to Door Ltd to be used in its manufacturing process. At 1 July 2016, Door Ltd held inventory sold to it by Holdthe Ltd in the previous year at a profit of $600. During the 201617 year, Holdthe Ltd sold inventory to Door Ltd for $21,000. None of this was on hand at 30 June 2017.

(b) Door Ltd also sells items of inventory to Holdthe Ltd. During the 201617 year, Door Ltd sold goods to Holdthe Ltd for $4 500. At 30 June 2017, inventory which had been sold to Holdthe Ltd at a profit of $300 was still on hand in Holdthe Ltds inventory.

(c) On 1 July 2016, Door Ltd sold an item of plant to Holdthe Ltd for $15,000. This plant had a carrying amount in the records of Door Ltd of $14,000 at time of sale. This type of plant is depreciated at 10% p.a. on cost.

(d) On 1 January 2016, Holdthe Ltd sold an item of inventory to Door Ltd for $18,000. The inventory had cost Holdthe Ltd $16 000. This item was classified by Door Ltd as plant. Plant of this type is depreciated by Door Ltd at 20% p.a.

(f) The tax rate is 30%.

I already have the solutions but I need guidance on how to work out the solutions

The solutions given are below

Business combination valuation entries

Accumulated depreciation Dr 30,000

Plant Cr 28,000

Deferred tax liability Cr 600

Business combination valuation reserve Cr 1,400

Depreciation expense Dr 400

Retained earnings (1/7/16) Dr 400

Accumulated depreciation Cr 800 (1/5 x $2 000 p.a. for 2 years)

Deferred tax liability Dr 240

Income tax expense Cr 120

Retained earnings (1/7/16) Cr 120

Goodwill Dr 2,950

Business combination valuation reserve Cr 2,950

Pre-acquisition entries

Retained earnings (1/7/16)* Dr 19,650

Share capital Dr 66,000

Business combination valuation reserve Dr 4,350

Shares in Door Ltd Cr 90,000 (* = $6,000 + $3,150 Inventory sold + $10,500 Patent sold)

Sales and profit in closing inventory

Sales revenue Dr 21,000

Cost of sales Cr 21,000

Sales revenue Dr 4,500

Cost of sales Cr 4,200

Inventory Cr 300

Deferred tax asset Dr 90

Income tax expense Cr 90

Profit in opening inventory of Door Ltd

Retained earnings (1/7/16) Dr 420

Income tax expense Dr 180

Cost of sales Cr 600

Sale of Plant - current period

Proceeds on sale of plant Dr 15,000

Carrying amount of plant sold Cr 14,000

Plant Cr 1,000

Deferred tax asset Dr 300

Income tax expense Cr 300

Accumulated depreciation - plant Dr 100

Depreciation expense Cr 100 (10% x $1000)

Income tax expense Dr 30

Deferred tax asset Cr 30

Sale of Inventory classified as Plant: prior period

Retained earnings (1/7/16) Dr 1,400

Deferred tax asset Dr 600 Plant Cr 2 000

Accumulated depreciation Dr 600

Depreciation expense Cr 400

Retained earnings (1/7/16) Cr 200 (20% x $2000 p.a. for 1.5 years)

Income tax expense Dr 120

Retained earnings (1/7/16) Dr 60

Deferred tax asset Cr 180