Urban Ltd acquired all the shares of Rural Ltd on 1 July 2020. Due diligence work conducted by Urban Ltd revealed that all the assets and liabilities of Urban Ltd were carried at fair value at the date of acquisition, except for a contingent liability resulting from a court case that has been assessed as a present obligation having a fair value of $200,000. The contingent liability was settled by Rural Ltd for $150,000 on 1 July 2022.

Which of the following consolidation adjusting entries is required as at 30 June 2022?

Group of answer choices

Dr FVA $140,000; Cr Retained earnings $140,000

Dr FVA $140,000; Dr DTA $60,000; Cr Contingent liability $200,000

Dr FVA $140,000; Dr ITE $60,000; Cr Gain on settlement $50,000; Cr Settlement expense $150,000

No consolidation entries will be required