On January 1, 2011, Delphin Ltd. acquired all the share capital of Telescon Ltd. when Telescon€™s equity consisted of:

100,000 common shares issued at $0.75 each... $75,000

Retained earnings ............... 27,000

All identifiable assets and liabilities of Telescon were recorded at fair value except:

The machinery has a further 10-year life. Of the inventory on hand at January 1, 2011, 90% was sold by December 31, 2011.
At January 1, 2011, Telescon was involved in a court case with an entity that was claiming damages from it.
Telescon had not recorded a liability in relation to any expected damages. Delphin measured the liability€™s fair value at $5,000. By December 31, 2013, the expectation of winning the court case had improved, so the fair value was considered to be $1,000.
The tax rate is 30%.
At December 31, 2013, Delphin€™s statement of financial position showed an investment in Telescon at $147,250.
Required
Prepare the fair value adjustments for the preparation of the consolidated financial statements for Delphin Ltd. and its subsidiary, Telescon, as at December 31, 2013.

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Fair value Inventory Machinery (net) Carrying amount $20,000 80,000 $25,000 95,000