Parent Ltd acquired all the equity in Sub Ltd on 1 April 2004 for $1 000 000. Sub Ltd had disclosed a contingent liability of $30 000 and an unrecognised intangible asset of $45 000. The equity of Sub Ltd on 1 April 2004 comprised: Share capital Retained earnings (RE's) Asset revaluation surplus (ARS) Financial information, of Parent Ltd and Sub Ltd, for the year ended 31 March 2021. follows: Income (all types of income) Less expenses (including COGS) Profit before tax Less income tax expense Profit after tax RE's-opening balance Less: dividends declared and paid Balance Sheet items: RF's closing balance Share capital Asset revaluation surplus Total equity Various liabilities Loan payable to Parent Total liabilities Total equity and liabilities Inventory Various assets Loan receivable from Sub. Investment in Sub Ltd Total assets Parent Ltd $ 1 670 500 1 268 500 402 000 112 000 290 000 300 000 100 000 490 000 500 000 180 000 1 170 000 1900 000 1 900 000 $3 070 000 170 000 1 500 000 400 000 1 000 000 $600 000 130 000 200 000 $3 070 000 Sub Ltd $ 1 350 000 1177 000 173 000 48 000 125 000 140 000 80 000 185 000 600 000 350 000 1 135 000 700 000 400 000 1 100 000 $2 235 000 235 000 2 000 000 $2 235 000 Parent Ltd's newly appointed junior accountant has been asked to prepare the draft consolidated financial statements for the year ended 31 March 2021. She has asked you for your expert help. At your request, the following information was obtained: (1) Five years ago, Sub Ltd obtained a loan from Parent Ltd. During the current financial year. Sub Ltd paid $15 000 of interest which related to this year. An additional $6 000 interest on this loan, relating to this financial year, is outstanding at balance date. (ii) During March 2020, Sub Ltd made sales to Parent Ltd of $20 000 and recognised a profit of $5 000. This purchase remained in the inventory of Parent Ltd as at 31 March 2020. (iii) On 4 March 2021, Sub Ltd made sales to Parent Ltd of $25 000 and recognised a profit of $6 200. Parent Ltd sold this purchase of inventory to Tan Ltd on 12 April 2021. (v) During February 2021, Parent Ltd made sales to Sub Lid of $13 000 and recognised a profit of $3 200. Sub Ltd sold this purchase of inventory to Kazey Ltd on 30 March 2021. (vi) Prior years impainment of total goodwill amounted to $16 000. For the current year ended 31 March 2021, the directors of Parent Ltd believe that the total goodwill has been further impaired by $4 000. PART A Required: a) Prepare the notional joumal entries, with detailed workings, in order to consolidate Parent Ltd and Sub Ltd in accordance with the requirements of NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements, for the year ended 31 March 2021. b) Prepare a consolidation worksheet for Parent Ltd, in accordance with the requirements of NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements, for the year ended 31 March 2021. c) Explain why the Parent Ltd's asset Investment in Sub Ltd' would not be included in the Group Financial Statements. d) Explain, by referring to the relevant accounting standards, why the Group recognised a Sub related contingent liability but Sub Ltd did not. QUESTION 3 PART A Part A a) Prepare the notional journal entries required by NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements. Include your workings. (1) Adjust Sub Ltd net assets fair value. (1) Recognise unrecognised intangible assets and contingent liabilities (111) Eliminate the Investment in Sub Ltd and the parent's portion of equity in the Sub: QUESTION 3 Part A a) continued: (v) Intergroup dividends: (vi) Intergroup sales and purchases of inventory: (vii) Other intergroup transactions: