INSTRUCTIONS TO THE QUESTION 1 (a), (b) and (c) On 1 July 2022, Pine Ltd. acquired all the share capital of Island Ltd. for $250,000. At that date, Island Ltd.'s equity consisted of the following: Share Capital General Reserve Retained Earnings 100,000 20,000 30,000 On the date of acquisition, all the assets and liabilities of Island Ltd. were at fair value, except Land was recorded at a cost of $ 100,000 but had a fair value of $120,000. Relevant financial accounts of Pine Ltd. and Island Ltd. on 30 June 2023 are presented below: Relevant Accounts Accumulated depreciation Cash/Banks Cost of sales Deferred tax asset Deferred tax liability Depreciation expense Dividend paid Dividend payable Dividend receivable Pine Ltd. 110,500 70,540 177,000 82,060 11,000 180,000 81,000 51,000 45,000 Island Ltd. 22,000 54,000 105,000 5,000 8,000 5,000 16,500 40,000 32,000 50,000 20,000 38,700 1,400 2,500 80,000 80,000 201,000 Dividend revenue Financial assets Gain on financial assets General reserve at 01/07/22 General reserve at 30/06/23 Income tax expense Interest expense Interest revenue Inventories Land Loan payable Loan receivable Other components of equity at 01/07/22 Other components of equity at 30/06/23 Other current assets Other expenses Other revenue Plant and equipment Profit for the period Retained earnings at 01/07/22 Retained earnings at 30/06/2023 Sales revenue Service expense Service revenue Share capital at 01/07/22 Share capital at 30/06/23 Shares in Island Ltd. Wages and salaries expenses 14,500 20,000 12,000 358,000 358,000 38,000 5,000 28,000 110,000 650,000 102,100 250,000 10,000 20,000 32,000 2,500 500 890,000 30,325 150,000 7,000 570,000 40,000 120,000 1,600,000 1,600,000 250,000 280,000 11,000 3,400 55,000 55,000 21,000 30,000 106,500 285,000 100,000 178,000 Additional information Additional information 1. On 1 January 2022, Pine Ltd. sold inventories to Island Ltd. for $45,000 on credit. The inventory had originally cost $30,000. On 30 June 2022, Pine still had 65% of the inventory on hand and all the receivables were outstanding. By 30 June 2023, all the remaining inventories were sold to third parties and all receivables were paid. 2. On 1 March 2023, Island Ltd. sold inventories to Pine Ltd. for $9,000 cash. The inventory had originally cost $4,000. On 30 June 2023, Pine Ltd. still had 20% of the inventory on hand. 3. On 1 November 2022, Island Ltd. borrowed $24,000 from Pine Ltd. at an annual interest rate of 2.5%. It is a 2-year interest-only loan with interest payable yearly. On 30 June 2023, all interest was paid. 4. On 1 October 2022, Island Ltd. sold a machine to Pine Ltd. for $18,000 cash. The machine had originally cost $15,000 and had a carrying amount of $3,000 at the time of the sale. Pine Ltd. depreciates the asset at 10% per annum straight line with a $1,000 residual amount. Island Ltd. had been depreciating the asset at 5% per year on a straight-line basis with no residual. 5. On 30 June 2023, Pine Ltd. declared a dividend of $81,000. On the same day, Island Ltd. also declared a dividend of $16,500. Pine Ltd recognises dividends when declared. The tax rate is 30%. Required Question 1 a (1 mark) Prepare the acquisition analysis and the required adjustments for consolidation on 1" July 2022. Required Question 1 a (1 mark) Prepare the acquisition analysis and the required adjustments for consolidation on 19 July 2022. Page 2 of 3 Question 1 b (4 marks) Prepare the consolidated worksheet with all detailed adjustment entries. You must show your workings for the consolidated reports ended on 30 June 2023. Question 1 c (10 marks) Prepare the consolidated financial statements (including the consolidated income statement, consolidated financial position and statement of changes in equity) for the period ended 30 June 2023. INSTRUCTIONS TO THE QUESTION 1 (a), (b) and (c) On 1 July 2022, Pine Ltd. acquired all the share capital of Island Ltd. for $250,000. At that date, Island Ltd.'s equity consisted of the following: Share Capital General Reserve Retained Earnings 100,000 20,000 30,000 On the date of acquisition, all the assets and liabilities of Island Ltd. were at fair value, except Land was recorded at a cost of $ 100,000 but had a fair value of $120,000. Relevant financial accounts of Pine Ltd. and Island Ltd. on 30 June 2023 are presented below: Relevant Accounts Accumulated depreciation Cash/Banks Cost of sales Deferred tax asset Deferred tax liability Depreciation expense Dividend paid Dividend payable Dividend receivable Pine Ltd. 110,500 70,540 177,000 82,060 11,000 180,000 81,000 51,000 45,000 Island Ltd. 22,000 54,000 105,000 5,000 8,000 5,000 16,500 40,000 32,000 50,000 20,000 38,700 1,400 2,500 80,000 80,000 201,000 Dividend revenue Financial assets Gain on financial assets General reserve at 01/07/22 General reserve at 30/06/23 Income tax expense Interest expense Interest revenue Inventories Land Loan payable Loan receivable Other components of equity at 01/07/22 Other components of equity at 30/06/23 Other current assets Other expenses Other revenue Plant and equipment Profit for the period Retained earnings at 01/07/22 Retained earnings at 30/06/2023 Sales revenue Service expense Service revenue Share capital at 01/07/22 Share capital at 30/06/23 Shares in Island Ltd. Wages and salaries expenses 14,500 20,000 12,000 358,000 358,000 38,000 5,000 28,000 110,000 650,000 102,100 250,000 10,000 20,000 32,000 2,500 500 890,000 30,325 150,000 7,000 570,000 40,000 120,000 1,600,000 1,600,000 250,000 280,000 11,000 3,400 55,000 55,000 21,000 30,000 106,500 285,000 100,000 178,000 Additional information Additional information 1. On 1 January 2022, Pine Ltd. sold inventories to Island Ltd. for $45,000 on credit. The inventory had originally cost $30,000. On 30 June 2022, Pine still had 65% of the inventory on hand and all the receivables were outstanding. By 30 June 2023, all the remaining inventories were sold to third parties and all receivables were paid. 2. On 1 March 2023, Island Ltd. sold inventories to Pine Ltd. for $9,000 cash. The inventory had originally cost $4,000. On 30 June 2023, Pine Ltd. still had 20% of the inventory on hand. 3. On 1 November 2022, Island Ltd. borrowed $24,000 from Pine Ltd. at an annual interest rate of 2.5%. It is a 2-year interest-only loan with interest payable yearly. On 30 June 2023, all interest was paid. 4. On 1 October 2022, Island Ltd. sold a machine to Pine Ltd. for $18,000 cash. The machine had originally cost $15,000 and had a carrying amount of $3,000 at the time of the sale. Pine Ltd. depreciates the asset at 10% per annum straight line with a $1,000 residual amount. Island Ltd. had been depreciating the asset at 5% per year on a straight-line basis with no residual. 5. On 30 June 2023, Pine Ltd. declared a dividend of $81,000. On the same day, Island Ltd. also declared a dividend of $16,500. Pine Ltd recognises dividends when declared. The tax rate is 30%. Required Question 1 a (1 mark) Prepare the acquisition analysis and the required adjustments for consolidation on 1" July 2022. Required Question 1 a (1 mark) Prepare the acquisition analysis and the required adjustments for consolidation on 19 July 2022. Page 2 of 3 Question 1 b (4 marks) Prepare the consolidated worksheet with all detailed adjustment entries. You must show your workings for the consolidated reports ended on 30 June 2023. Question 1 c (10 marks) Prepare the consolidated financial statements (including the consolidated income statement, consolidated financial position and statement of changes in equity) for the period ended 30 June 2023