Sunnybank Ltd acquired all issued share capital of Sunnybank Hills Ltd on 1 July 2019 for a cash payment of $700,000. The share capital and reserves of Sunnybank Hills Ltd at the date of acquisition were:

Share capital $300,000

Retained earnings $200,000

Revaluation surplus $36,000

All assets of Sunnybank Hills Ltd were fairly valued at the date of acquisition, except for an equipment that had a fair value $20,000 greater than its carrying amount. The cost of the equipment was $75,000 and it had accumulated depreciation of $25,000. At the date of acquisition, it was expected that the equipment had a remaining useful life of eight years. There were no transactions between Sunnybank Ltd and Sunnybank Hills Ltd from 1 July 2019 to 30 June 2021.

On 1 January 2022 Sunnybank Hills Ltd sold an item of plant to Sunnybank Ltd for $55,000 when its carrying value in Sunnybank Hills’s books was $40,000 (original cost $90,000 and original estimated life of nine years). There were no other transactions between Sunnybank Ltd and Sunnybank Hills Ltd for year ended 30 June 2022.

2 On 30 June 2024 Sunnybank Ltd sold a property to Sunnybank Hills Ltd for $400,000 when its carrying value, and original cost, in Sunnybank’s books was $420,000 and estimated remaining useful life was twenty years. During financial year 2024, Sunnybank Ltd provided management consultation to Sunnybank Hills Ltd and this was the first time that Sunnybank Ltd provided such service to Sunnybank Hills Ltd. At the end of 2024, Sunnybank Hills Ltd paid $5,000 for these services and there is no payable for these services at year end. There were no other transactions between Sunnybank Ltd and Sunnybank Hills Ltd from 1 July 2022 to 30 June 2024.

Sunnybank Ltd incurred the following transactions with Sunnybank Hills Ltd for year ended 30 June 2025:

 Sunnybank Ltd made sales of inventory to Sunnybank Hills Ltd of $200,000, while Sunnybank Hills Ltd sold $250,000 of inventory to Sunnybank Ltd.

 Closing inventories on 30 June 2025 included the following amounts: Sunnybank Ltd $90,000 (bought from Sunnybank Hills Ltd) and Sunnybank Hills Ltd $150,000 (bought from Sunnybank Ltd). Intragroup sales of inventory policy applied.

 The opening inventory in Sunnybank Ltd included stock acquired from Sunnybank Hills Ltd, which had originally cost Sunnybank Hills Ltd $140,000. The opening inventory of Sunnybank Hills Ltd included stock acquired from Sunnybank Ltd, which had originally cost Sunnybank Ltd $160,000. Intragroup sales of inventory policy applied.

 Sunnybank Ltd declared and paid dividend $75,000. Sunnybank Hills Ltd declared and paid dividend $50,000 on 30 June 2025.

 Sunnybank Hills Ltd has a number of long-term loans, including an interest free five-year loan for $50,000 from Sunnybank Ltd. This interest free five-year loan was effective from 1 July 2024.

You were appointed as a financial accountant at Sunnybank Ltd and requested to prepare the followings:

I. acquisition analysis and adjustment/elimination journal entries for consolidation at acquisition, 1 July 2019;

II. adjustment/elimination journal entries for consolidation as at 30 June 2024, and

III. adjustment/elimination journal entries for consolidation as at 30 June 2025. After meeting with your supervisor you gathered the following information which you might need to complete your work:

 Sunnybank Ltd has the following accounting policies for the economic entity:

 All property, plant and equipment are depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of months the non-current asset is held in the relevant year.  Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary;

 Intragroup sales of inventory to be at a mark-up of 50% on cost.

 All calculated amounts are to be rounded to the nearest whole dollar. Companies in the group do not show cents in any journals, worksheets, or financial statements. 3

 The management team of Sunnybank Ltd believes that goodwill acquired from the business combination is impaired by $5,000 in the current financial year (1 July 2024 - 30 June 2025). There is no previous impairment of goodwill.

 The company tax rate is currently 30% and this rate has not changed for a number of years.

 Journal narrations are required.

 Number each year consolidation elimination/adjusting journal entries by 1, 2, 3, …, etc;. Where more than one journal entry is needed for an event to be completely accounted for add the letters a,b,c,…etc to them as necessary.