Consolidation with differences between carrying amount and fair value at acquisition date and intragroup transactions  LO3, 4, 5, 6, 7 Zoe Ltd purchased 100% of the shares of Matilda Ltd on 1 July 2017 for $50 000. At that date the equity of the two entities was as follows. Zoe Ltd Matilda Ltd Asset revaluation surplus $25 000 $ 4 000 Retained earnings 14 500 2 800 Share capital 50 000 40 000 At 1 July 2017, all the identifiable assets and liabilities of Matilda Ltd were recorded at fair value except for the following. Carrying amount Fair value Inventories $ 3 000 $ 3 500 Plant and equipment (cost $80 000) 60 000 61 000 All of the inventories were sold by December 2017. The plant and equipment had a further 5-year useful life. Any valuation adjustments are made on consolidation. Financial information for Zoe Ltd and Matilda Ltd for the period ended 30 June 2019 is shown below. Zoe Ltd Matilda Ltd Sales revenue $78 000 $40 000 Dividend revenue 4 400 1 600 Total income 82 400 41 600 Cost of sales 60 000 30 000 Other expenses 10 800 5 000 Total expenses 70 800 35 000 Gross profit 11 600 6 600 Gain on sale of furniture 0 500 Profit before income tax 11 600 7 100 Income tax expense 3 000 2 200 Profit for the period 8 600 4 900 Retained earnings (1/7/18) 14 500 2 800 23 100 7 700 Interim dividend paid 4 000 2 000 Final dividend declared 8 000 2 400 12 000 4 400 Retained earnings (30/6/19) 11 100 3 300 Additional information • Zoe Ltd records dividend receivable as revenue when dividends are declared. • The beginning inventories of Matilda Ltd at 1 July 2018 included goods which cost Matilda Ltd $2000. Matilda Ltd purchased these inventories from Zoe Ltd at cost plus 33% mark-up. • Intragroup sales totalled $10 000 for the period ended 30 June 2019. Sales from Zoe Ltd to Matilda Ltd, at cost plus 10% mark-up, amounted to $5600. The ending inventories of Zoe Ltd included goods which cost Zoe Ltd $4400. Zoe Ltd purchased these inventories from Matilda Ltd at cost plus 10% mark-up. • On 31 December 2018, Matilda Ltd sold Zoe Ltd office furniture for $3000. This furniture originally cost Matilda Ltd $3000 and was written down to $2500 just before the intragroup sale. Zoe Ltd depreciates furniture at the rate of 10% p.a. on cost. • The asset revaluation surplus relates to land. The following movements occurred in this account. Zoe Ltd Matilda Ltd 1 July 2017 to 30 June 2018 $3000 $(500) 1 July 2018 to 30 June 2019 2000 500 • The income tax rate is 30%. Required 1. Prepare the acquisition analysis at 1 July 2017. 2. Prepare the business combination valuation entries and pre-acquisition entries at 1 July 2017. 3. Prepare the business combination valuation entries and pre-acquisition entries at 30 June 2019. 4. Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 30 June 2019. 5. Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 30 June 2019. 6. Prepare the consolidated statement of profit or loss and other comprehensive income for the period ended 30 June 2019.