On $1$ January $2026,$ P Ltd acquired all the issued share capital of S Ltd$,$ giving in exchange

$100,000$ shares in P Ltd$,$ these having a fair value of $$5$ per share. At acquisition date, the

statements of financial position of P Ltd and S Ltd$,$ and the fair values of S Ltd$$s assets and

liabilities, were as follows:

P Ltd S Ltd

Carrying

amount

Carrying

amount

Fair

value

EQUITY AND LIABILITIES

Equity

Share capital $$550,000$ $$300,000$

Retained earnings $350,000140,000$

Total equity $900,000440,000$

Liabilities

Provisions $30,00060,00060,000$

Payables $27,00034,00034,000$

Current tax liabilities $10,0006,0006,000$

Total liabilities $67,000100,000$

Total equity and liabilities $$967,000$ $$540,000$

ASSETS

Land $$120,000$ $$150,000170,000$

Equipment $620,000480,000330,000$

Accumulated depreciation $(380,000)(170,000)$

Shares in S Ltd $500,000$

Inventory $92,00075,00080,000$

Cash $15,0005,0005,000$

Total assets $$967,000$ $$540,000$

At acquisition date, S Ltd has an unrecorded patent with a fair value of $$20,000,$ and a

contingent liability with a fair value of $$15,000.$ This contingent liability relates to a loan

guarantee made by S Ltd which did not recognise a liability in its records because it did

not consider it could reliably measure the liability. The tax rate is $30\%.$

$2$

Events after acquisition date $($assuming the reporting date is December $31,2028)$

$-$ Land in S Ltd was sold in $2028,$ for $$200,000$

$-$ The equipment is depreciated on a straight$-$line basis over a $5-$year period

$-$ The inventory on hand in S Ltd at January $1,2026$ is all sold by December $31,2026$

Following are the accounts of the $2$ companies at December $31,2028$

P Ltd S Ltd

Revenue $120,00095,000$

Expenses $85,00072,000$

Operating income $35,00023,000$

Gain on sale of non$-$current asset $15,00031,000$

Profit before tax $50,00054,000$

Income tax expense $15,00021,000$

Profit ater tax $35,00033,000$

Retained earnings $($o$/$b $1\mathrm{.}1\mathrm{.}2028)420,000220,000$

Retained earnings $($c$/$b $31\mathrm{.}12\mathrm{.}2028)455,000253,000$

Share capital $550,000300,000$

Total equity $1,005,000553,000$

Liabilities

Provisions $40,00040,000$

Payables $32,00024,000$

Current tax liabilities $12,00016,000$

Total liabilities $84,00080,000$

Total equity and liabilities $1,089,000633,000$

Land $170,00050,000$

Equipment $750,000683,000$

Accumulated depreciation $(448,000)(270,000)$

Shares in S Ltd $500,000$

Inventory $52,00075,000$

Cash $65,00095,000$

Total assets $1,089,000633,000$