Sounds Ltd purchased a 100% interest in L&S Ltd on the 1 July 2008 (2 financial years earlier) at a cost of $3 500 000. At acquisition the capital and reserves of L&S Ltd were:

Share Capital
$ 1 750 000
General Reserve
$ 200 000
Retained Earnings
$ 1 200 000


At acquisition the fair values of the following assets were considered to be greater than L&S Ltd?s carrying amounts:


Fair Value
Carrying amount
Land
$ 1 600 000
$ 1 400 000
Plant
$ 1 450 000
$ 1 400 000
Inventory
$ 622 500
$ 612 500


Additional information:
At acquisition the re-valued building had a further useful life of 10 years.
The inventory acquired was on-sold by Sounds Ltd in February 2010.
On the 1/1/2009 L&S Ltd sold an item of plant, with a carrying value of $122 500 (cost $175 000, accumulated depreciation $52,500) to Sounds Ltd for a profit of
$35 000. This plant was assessed as having a remaining useful life of 7 years.
On the 1/4/2011 Sound Ltd made a $15 000 loan to L&S Ltd at an interest rate of 7.5% p.a. To be repaid with interest on 30/9/2011
The opening inventory of Sounds Ltd as at 1/7/2010 included inventory acquired from L&S Ltd for $34,500 that had cost L&S Ltd $28 750.
Also during the current year:
L&S Ltd sold $81 000 of inventory to Sounds Ltd. All this inventory remained unsold as at 30 June 2011
Sounds Ltd sold L&S Ltd inventory for $15 000. The inventory had originally cost Sounds Ltd $12 000. Half this inventory was still unsold by L&S Ltd as at 30 June 2011.
Sounds Ltd management considered that Goodwill needed to be impaired by a further $3 200. Goodwill had previously been impaired by $8 000.
L&S Ltd paid Sounds Ltd a management fee of $62 000
The income tax rate is 30%.

The accounts for Sounds Ltd & L&S Ltd at 30 June 2011 are as follows:


Sounds Ltd
L&S Ltd
$000
$000
Reconciliation of opening and closing retained earnings
Sales revenue
4 000
1 000
Less: cost of goods sold
-1 700
-400
Other revenue
245
87.5
Less: other expenses
-210
-105
Profit
2 335
582.5
Tax expense
636
250
Profit after tax
1 699
332.5
Retained earnings 30 Jun 10
3 500
1 900
5 199
2 232.5
Dividends paid
700
140
Retained earnings 30 Jun 11
4 499
2 092.5








Statement of financial position

Shareholders? Equity
Retained earnings 30 Jun 11
4 499
2 092.5
Share capital
14 000
1 750
Current liabilities
Accounts payable
350
197.5
Non-current liabilities
Loans
2 100
875
Total Liabilities
2 450
1 072.5
Total Shareholder equity and Liabilities
20 949
4 915
Current assets
Cash
805
477.5
Accounts receivable
509
512.5
Inventory
2 100
1 050
Non-current assets
Land
5 040
1 400
Plant
8 645
1 300
Investment in Jackson Ltd
3 500
Deferred tax asset
350
175
Total Assets
20 949
4 915



Required:

A) Complete the acquisition analysis and BCVR entries as at 1 July 2008
B) Prepare the consolidation entries as at 30 June 2011
C) Prepare the consolidation worksheet as at 30 June 2011

No consolidated financials are required for this question.

Question: 3
Ans: Acquisition analysis
Net fair value of identifiable assets and liabilities of L&S ltd.
$000 $000
Equity = (1750+200+1200) 3150
+200(1-30%) Land 140
+50(1-30%) Plant 35
+10(1-30%) Inventory 7
Total 3332
Consideration transferred 3500
Goodwill realised = (3500 – 3332) 168

BCVR Entries as at 1 July 2008 $000 $000
Dr Cr
Land 200
Deferred tax liability 60
Business combination valuation reserve 140

Plant 50
Deferred tax liability 15
Business combination valuation reserve 35

Inventory 10
Deferred tax liability 3
Business combination valuation reserve 7

The inventory acquired was on - sold by Sounds ltd in February 2010
$000 $000
Dr Cr
Inventory 10
Deferred tax liability 3
Business combination valuation reserve 7

Cost of sales 10
Inventory 10

Deferred tax liability 3
Income tax expense 3

Business combination valuation reserve 7
Retained earning 7

On the 1/1/2009 L&S Ltd sold an item of plant, with a carrying value of $122 500 (cost $175 000, accumulated depreciation $52,500) to Sounds Ltd for a profit of $35 000. This plant was assessed as having a remaining useful life of 7 years.


but I could not do the consolidated journal entry and consolidated worksheet can anyone help with that or just advise me how you can do it