Topic 1: Consolidation: Principles and accounting requirements On 1 July 2017, Positive Ltd acquired all the issued shares of Smart Ltd for $123,000. At the date of acquisition, the shareholders equity of Smart Ltd was as follows. $ Share capital 65,000 General reserve 25,000 Retained earnings 20,250 Total 110,250 All the assets and liabilities of Smart Ltd were recorded at amounts equal to their fair values at the acquisition date, except for some assets detailed below. Carrying amount Fair value $ $ Plant (cost $115,000) 100,000 105,000 Land 50,000 60,000 Inventories 15,000 19,000 Additional information: The inventory was all sold by 30 June 2018. The land was sold on 1 February 2018 for $75,000. The plant was considered to have a further 5-year life. The plant was sold for $77,500 on 1 January 2019. At acquisition date Smart Ltd had recorded a dividend payable of $3,500 and goodwill of $2,500 (net of accumulated impairment losses of $6,500). Smart Ltd had not recorded some internally generated brands that Positive Ltd considered to have a fair value of $6,000. The brand was considered to have an indefinite life. An item not recorded by Smart Ltd was a contingent liability relating to a current court case in which Smart Ltd was involved and a supplier was seeking compensation. Positive Ltd placed a fair value of $7,500 on this liability. This court case was settled in May 2019 at which time Smart Ltd was required to pay damages of $8,000. In February 2018, Smart Ltd transferred $10,000 from the general reserve on hand at 1 July 2017 to retained earnings. A further $7,500 was transferred in February 2019. Both companies have an equity account entitled Other components of equity to which certain gains and losses from financial assets are taken. At 1 July 2018, the balances of these accounts were $15,000 (Positive Ltd) and $7,500 (Smart Ltd). The financial statements of the two companies at 30 June 2019 contained the following information: Positive Ltd Smart Ltd $ $ Revenue 45,000 32,000 Expenses 17,000 21,000 Trading profit 28,000 11,000 Gains (losses) on sale of non-current assets 4,000 4,000 Profit before tax 32,000 15,000 Income tax expense 6,000 2,500 Profit for the period 26,000 12,500 Retained earnings 1 July 2018 51,500 27,500 Transfer from general reserve 15,000 7,500 92,500 47,500 Dividend paid 10,000 0 Retained earnings 30 June 2019 82,500 47,500 Share capital 75,000 65,000 General reserve 5,000 10,000 Other components of equity 12,500 9,000 Total equity 175,000 131,500 Accounts payable 20,000 5,000 Deferred tax liability 9,000 5,000 Other non-current liabilities 125,000 115,000 Total liabilities 154,000 125,000 Total equity and liabilities 329,000 256,500 Plant 157,000 233,000 Accumulated depreciation plant (91,000) (110,000) Land 10,000 10,000 Brands 40,000 0 Shares in Smart Ltd 123,000 0 Financial assets 55,000 103,500 Cash 5,000 2,500 Inventories 20,000 15,000 Goodwill 10,000 9,000 Accumulated impairment losses 0 (6,500) Total assets 329,000 256,500 Required: Prepare the acquisition analysis at 1 July 2017. Prepare the consolidation worksheet entries for Positive Ltds group at 30 June 2019. Prepare the consolidation worksheet for Positive Ltds group at 30 June 2019. Note: you are not required to prepare the consolidation financial statements.