PART B, QUESTION 2 (1 mark + 5 marks in next part)

On 1 July 2020 P Ltd purchased 100% of the issued capital of S Ltd for a purchase price of $859,000. At that date the shareholders equity of S Ltd disclosed:

Share capital $121,000

General reserve $50,000

Retained earnings $260,000

Additional information:

1. At the date of acquisition, all net identifiable assets of Sub Ltd were recorded at fair value
2. Sales by S to P Ltd were $67,000.
3. P Ltd sold inventory of $109,000 to S Ltd on 1 July 2021. The original cost of this inventory to P Ltd was $53,000. S Ltd has 47% of this inventory on hand at 30 June 2022
4. Company tax rate is 30%

Requirements:

1. Provide all consolidation journal entries (including workings) in next part of this question (5 marks)
2. Compute the amount of 'realised profit' of the inventory transaction above in the form of 'cost of goods sold' and enter the amount in the answer space below (1 mark)
3. Provide all your workings or journals in the answer space below.