Topic: Consolidation worksheet with adjustment entries for intragroup transactions: inventories, PPE, dividends, and debentures.

Task Details:

On $1$ July $2021,$ Ingrid Ltd acquired all the issued shares of Isabella Ltd$.$ The consideration for the acquisition was $$47350$ cash plus $100000$ shares in Ingrid Ltd$,$ which had a fair value of $$2$ per share.

At the acquisition date, Isabella Ltd had inventories with a fair value $$1500$ greater than carrying amount. All these inventories were sold by Isabella Ltd prior to $30$ June $2022.$

Isabella Ltd conducts a research and development division. It has expensed all past outlays. At the acquisition date, Ingrid Ltd assessed there was an in$-$process research and development asset with a fair value of $$12000.$ Ingrid decided that $$3000$ of this asset should be impaired for the year to $30$ June $2022.$ The income tax rate is $30\%.$

Intragroup transactions occurring in the annual period ended $30$ June $2022$ were as follows.

During the course of the year, Isabella Ltd sold inventories to Ingrid Ltd$.$ Total sales were $$60000,$ these being sold at cost plus $25\%.$ At $30$ June $2022,$ Ingrid Ltd still held inventories that it had bought from Isabella Ltd for $$15000.$

On $1$ January $2022,$ Ingrid Ltd acquired $900$ $$1008\%$ debentures previously issued by Isabella Ltd$.$ These were acquired on the open market for $$85500.$ Interest on debentures is paid half$-$yearly. Interest due on $30$ June $2022$ has been paid by Isabella Ltd$.$

On $1$ April $2022,$ Ingrid Ltd sold an inventory item to Isabella Ltd for $$45000.$ This asset had cost Isabella Ltd $$36000$ to manufacture. The asset is used by Isabella Ltd as part of its plant and machinery. The depreciation rate used by Isabella Ltd for this type of asset is $20\%$ p$.$a$.$ on cost$.$

On $1$ March $2022,$ Isabella Ltd declared and paid a dividend of $$14700$ from its profits. On $30$ June $2022,$ Isabella Ltd declared a further dividend of $$10800.$

The financial information provided by the two entities for $30$ June $2022$ was as follows:

Ingrid Ltd

Isabella Ltd

Sales

$ $352100$

$ $272000$

Dividend revenue

$25500$

$5000$

Other income$/$gains

$10000$

$23000$

$387600$

$300000$

Cost of sales

$(184500)$

$(180000)$

Other expenses

$(51900)$

$(33000)$

$(236400)$

$(213000)$

Profit before income tax

$151200$

$87000$

Income tax expense

$(48000)$

$(30000)$

Profit for the year

$103200$

$57000$

Retained earnings $(1/7/21)$

$36000$

$18000$

$139200$

$75000$

Dividend paid

$(51000)$

$(14700)$

Dividend declared

$(36000)$

$(10800)$

$(87000)$

$(25500)$

Retained earnings $(30/6/22)$

$52200$

$49500$

Share capital

$480000$

$180000$

General reserve

$102000$

$36000$

Total equity

$ $634200$

$ $265500$

Deferred tax liabilities

$ $19500$

$ $7500$

$8\%$ debentures

$0$

$120000$

Dividend payable

$24000$

$10800$

Provisions

$18000$

$35460$

Payables

$16500$

$15000$

Total liabilities

$ $78000$

$ $188760$

Total equity and liabilities

$ $712200$

$ $454260$

Plant and machinery

$160000$

$165000$

Accumulated depreciation

$(60000)$

$(39000)$

Land

$143450$

$225000$

Debentures in Isabella Ltd

$85500$

$$

Shares in Isabella Ltd

$247350$

$$

Cash

$1150$

$5260$

Receivables

$31750$

$15500$

Inventories

$103000$

$82500$

Total assets

$ $712200$

$ $454260$

Submission requirements details:

Required

$1.$ Calculate acquisition analysis as of $1$ July $2021$

$2.$ Prepare the consolidation journal entries for $30$ June $2022$