Sunshine Ltd acquired all the issued shares of Rainbow Ltd on 1 July 2018 for $350 000. At this date Rainbow Ltd recorded a dividend payable of $12 000 and equity of:
Share capital $ 35 000
Retained earnings 52 000
Asset revaluation surplus 10 000
All the identifiable assets and liabilities of Rainbow Ltd were recorded at amounts equal to their fair values at acquisition date except for:
Carrying amount Fair value
Inventory $ 15 000 $ 16 000
Machinery (cost $150 000) 70 000 85 000
The machinery was considered to have a further 10-year life. Of the inventory, 90% was sold by 30 June 2019. The remainder was sold by 30 June 2020.
In May 2019, Rainbow Ltd transferred $2000 from the Asset revaluation surplus at 1 July 2018 to Retained Earnings. The Goodwill has been impaired by 30 June 2019. The impairment loss is 500.
The tax rate is 30%.
The following information was provided by the two companies at 30 June 2019.
|Profit before tax||120000||14,900|
|Income tax expense||56000||4200|
|Profit for the year||64000||10700|
|Retained earnings (01/07/2018)||80000||52000|
|Transfer to Retained earnings||2000|
|Retained earnings (30/06,019)||144000||64700|
|Share capital||360000||35 000|
|Asset revaluation surplus||18500||8000|
|Plant and machinery||232,000||125600|
|Investment in Rainbow||338,000|
Prepare the Acquisition analysis, consolidation adjustments, consolidation worksheet and consolidated income statement and consolidated balance sheet of Sunshine Ltd at 30 June 2019
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