Mary Ltd acquired 75% of the issued shares of Edith Ltd on 1 July 2018. In exchange for these shares, Mary Ltd gave consideration of $26 000 cash and 10 000 shares in Mary Ltd, these having a fair value of $2 each. At this date the shareholders’ equity of Edith Ltd consisted of:

At this date, all the identifiable assets and liabilities of Edith Ltd were recorded at amounts equal to their fair values except for the plant for which the fair value was $2000 greater than the carrying amount of $25 000 (original cost was $35 000). The plant was expected to have a further 5-year life. The fair value of the non-controlling interest on 1 July 2018 was $15 000. Mary Ltd uses the full goodwill method. The tax rate is 30%.

Assets held by Edith Ltd on 30 June 2023 include financial assets. Gains and losses on these assets are recognized in other comprehensive income. During the year ended 30 June 2023, Edith Ltd recorded gains of $1500 on these assets. Financial information supplied by the two companies at 30 June 2023 was as follows.

			Mary Ltd						Edith Ltd
	Sales revenue		$		75  000					$	118  000
	Interest revenue				375						1  000
	Dividend revenue				2  700						1  000
					78  075						120  000
	Cost of sales				(51  000)						(87  750)
	Financial expenses				(2  250)						(3  000)
	Selling expenses				(6  000)						(9  000)
	Other expenses				(2  250)						(2  250)
					(61  500)						(102  000)
	Profit before tax				16  575						18  000
	Income tax expense				(7  500)						(8  200)
	Profit for the year				9  075						9  800
	Retained earnings (1/7/22)				28  900						21  700
					37  975						31  500
	Dividend paid				(4  000)						(3  600)
			Mary Ltd						Edith Ltd
	Retained earnings (30/6/23)				33  975						27  900
	Share capital				60  000						45  000
	Other components of equity				—						7  500
	Total equity				93  975						80  400
	Current liabilities				12  750						4  350
	Non‐current liabilities: Loans				—						7  500
Total liabilities				12  750						11  850
Total equity and liabilities		$		106  725				$		92  250
	Plant				45  000						90  000
	Accumulated depreciation — plant				(25  500)						(45  750)
	Shares in Edith Ltd				46  000						—
	Loans to Edith Ltd				3  750						—
	Inventories				13  400						23  250
	Cash				21  075						750
	Financial assets				—						16  500
	Deferred tax assets				3  000						7  500
	Total assets		$		106  725					$	92  250

Additional information

(a) On 1 July 2022, Mary Ltd held inventories that had been sold to it by Edith Ltd in the previous year at a profit of $1200.

(b) During the year ended 30 June 2023, Edith Ltd sold inventories to Mary Ltd for $28 500. On 30 June 2023, Mary Ltd still had on hand inventories that had been sold to it by Edith Ltd for a profit of $1800 before tax.

(c) Interest of $375 was paid by Mary Ltd to Edith Ltd on both 30 June 2022 and 30 June 2023.

Required

Prepare the consolidated financial statements of Mary Ltd for the year ended 30 June 2023.

Answer rating: 100% (QA)

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