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X Ltd acquired on 1 July 2019 all the issued shares ( cum div .) of Y Ltd for $33000. At this date, the equity

X Ltd acquired on 1 July 2019 all the issued shares (cum div.) of Y Ltd for $33000. At this date, the equity of Y Ltd was as follows.

Share capital $20000

General reserve 2000

Retained earnings 5000

All the identifiable assets and liabilities of Y Ltd were recorded at amounts equal to their fair values except for the following.

Carrying amount Fair value
Plant (cost $22000) $18000 $18 600
Land 19000 21000
Inventories 2000 2 800

The plants expected remaining useful life was 5 years with benefits being expected evenly over that period. The plant was sold on 1 January 2022 for $18 700. The land was sold in February 2021 for $25000. Of the inventories, 90% was sold by 30 June 2020 and the rest by 30 June 2021.

At 1 July 2019, Y Ltd had recorded a dividend payable of $1000 that was paid in September 2019. Y Ltd also had some unrecorded assets, in particular the brands relating to the clothing sold in the teenage market. X Ltd valued these brands at $1 200 and assessed them to have an indefinite life. In the notes to its financial statements at 30 June 2019, Y Ltd disclosed a contingent liability relating to a guarantee it had made to one of its related companies. X Ltd assessed the fair value of the guarantee payable as being $1000. In August 2021, Y Ltd was required to pay $250 in relation to the guarantee.

All transfers to the general reserve made by Y Ltd have been from retained earnings earned prior to 1 July 2019. The tax rate is 30%.

The financial information provided by the two companies at 30 June 2020 is as follows.

X Ltd Y Ltd
Revenue 19 000 11 000
Expenses (8 000) (7 600)
11 000 3 400
Gains on sale of non-current assets 500 400

Profit before tax

11 500 3 800
Income Tax expense (4 000) (600)
Profit for the year 7 500 3 200
Other Comprehensive income
Gains on revaluation of plant 1 200 0

Comprehensive income for the year

$8 700 $3 200
Profit for the year $7 500 $3 200
Retained earnings (1/7/21) 8 000 8 800
15 500 12 000
Dividend Paid (3 400) 0
Transfer to general reserve 0 (1 500)
(3 400) (1 500)
Retained Earnings (30/6/22) $12 100 $10 500
Share Capital $28 000 $20 000
General reserve 2 000 4 800
Asset revaluation surplus 2 400 0
Retained earnings 12 100 10 500
Total equity 44 500 35 300
Provisions 1 500 1 200
Payables 4 000 800
Total Liabilities 5 500 2 000
Total Equity and liabilities $50 000 $37 300
Cash $1 200 $3 000
Accounts Receivable 2 800 1 200
Inventories 3 000 5 100
Plant 23 000 32 000
Accumulated Depreciation- Plant (12 000) (4 000)
Shares in Brooks Ltd 32 000 0
Total Asset $50 000 $37 300

Required

  1. Prepare the acquisition analysis at 1 July 2019.
  2. Prepare the consolidation worksheet entries for X Ltds group at 30 June 2022.
  3. Prepare the consolidation worksheet for X Ltds group at 30 June 2022

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