'X' Ltd acquired all the issued shares (ex dividend) of 'Y' Ltd on 1 July 2017 for $24,600. At this date the equity of 'Y' Ltd consisted of the following.

Share Capital

$13,000

General Reserve

5,000

Retained Earnings

4,050

At the acquisition date all the identifiable assets and liabilities of 'Y' Ltd were recorded at amounts equal to the fair value except for the following.

Carrying amount

Fair value

Plant (cost $23,000

$20,000

$21,000

Land

10,000

12,000

Inventories

3,000

3,800

The plant was considered to have a further 5-year life. The plant was sold for $15,500 on 1 January 2019. The land was sold on 1 February 2018 for $15,000. The inventories were all sold by 30 June 2018. Also, at acquisition date 'Y' Ltd had recorded a dividend payable of $700 and goodwill (net of accumulated impairment losses of $1,300) of $500. 'Y' Ltd had not recorded some internally generated brands that 'X' Ltd considered to have a fair value of $1,200. The brand was considered to have an indefinite life. Also not recorded by 'Y' Ltd was a contingent liability relating to a current court case in which 'Y' Ltd was involved and a supplier was seeking compensation. 'X' Ltd placed a fair value of $1,500 on this liability. This court case was settled in May 2019 at which time 'Y' Ltd was required to pay damages of $1,600.

In February 2018, 'Y' Ltd transferred $2,000 from the general reserve on hand at 1 July 2017 to retained earnings. A further $1,500 was transferred in February 2019.

Both companies have an equity account entitled 'Other components of equity' that recognise certain gains and losses from financial assets. At 1 July 2018, the balances of these accounts were $3,000 for 'X' Ltd and $1,500 for 'Y' Ltd.

The financial statements of the two companies at 30 June 2019 contained the following information.

'X' Limited

'Y' limited

Revenues

13,000

6,400

Expenses

(7,000)

(4,200)

Trading profit

6,000

2,200

Gains (losses) on sale of non-current assets

3,000

800

Profit before tax

9,000

3,000

Income tax expense

(2,000)

(500)

Profit for the period

7,000

2,500

Retained Earnings (1/7/18)

33,300

5,500

Transfer from General reserve

3,000

1,500

43,300

9,500

Dividend paid

(2,000)

0

Retained earnings (30/6/19)

41,300

9,500

Share capital

15,000

13,000

General reserve

1,000

2,000

Other component of Equity

2,500

1,800

Total Equity

59,800

26,300

Accounts payable

4,000

1,000

Deferred tax liability

1,800

1,000

Other non-current liabilities

24,800

23,000

Total liabilities

30,600

25,000

Total Equity and liabilities

90,400

51,300

Plant

43,000

38,800

Accumulated Depreciation- Plant

(18,200)

(22,000)

Land

15,000

20,000

Brands

8,000

0

Shares in 'Y' limited

24,600

0

Financial Assets

11,000

10,500

Cash

1,000

500

Inventories

4,000

3,000

Goodwill

2,000

1,800

Accumulated Impairment Losses

0

(1,300)

Total Assets

90,400

51,300

Required

1.Prepare the acquisition analysis at 1 July 2017. (5 marks)

2.Prepare the consolidation worksheet entries for 'X' Ltd's group at 30 June 2019.

(12 marks)

3.Prepare the consolidated worksheet for 'X' Ltd's group at 30 June 2019.

(10 marks)