Question is in File

(a) Acquisition analysis at 1st July 201
Net fair value of identifiable assets and liabilities of Potorro Ltd. =
$25,000 + $7,500 (Equity) + Inventory (Net of Tax)
Tax rate is 30%
            = $32,500 + $1,000 (1-.30)
         = $33,200
Consideration transferred = $50,000 – Dividend unpaid
         = $50,000 - $7,500 = $42,500
Goodwill = Consideration transferred – NFV of IAL
     = $42,500 - $33,200 = $9,300
(b) Consolidation Journal entries at 30th June 2020
    1. Business combination Valuation Reserve entries
    Particulars
    Debit ($)
    Credit ($)
    Cost of Sales
     900
     
    To Income Tax Expense
     
     270
    To Transfer from Business combination
reserve
     
     630
     
     
     
    Inventory
     100
     
    To Deferred Tax Liability
     
     30
    To Business Combination Reserve
     
     70
     
     
     
    Goodwill
     9,300
     
    To Business Combination Reserve
     
     9,300
     
     
     
    2. Pre-Acquisition entries
    Retained Earnings (1/7/2019)
     7,500
     
    Share Capital
     25,000
     
    Business Combination reserve
     10,000
     
    To Shares in Potorro Ltd.
     
     42,500
     
     
     
    Transfer from Business combination
reserve
     630
     
    To Business Combination Reserve
     
     630
     
     
     
    Impairment Loss - Goodwill
     8,000
     
    To Accumulated Impairment Loss
     
     8,000
     
     
     
    3. Intragroup Transactions
    Dividend revenue
     2,500
     
    To Interim Dividend Paid
     
     2,500
    (Being interim dividend paid)
     
     
    Sales Revenue
     30,000
     
    To Cost of Sales
     
     27,500
    To Inventory
     
     2,500
    (Being goods sold to Gilberts Ltd.
Adjusted)
     
     
    Deferred Tax Asset
     750
     
    To Income Tax expense
     
     ...