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Below are extract statements of H Ltd and its wholly owned subsidiary S Ltd.

On 1 January 20.4, the date H Ltd acquired S Ltd, the net assets of S Ltd was represented by the following:

Contributed equity $80,000

Retained income $45,000

	H Ltd	S Ltd
Statements of Financial Position at 31 December 20.7
ASSETS
Property plant and equipment	$ 80,000.00	$ 150,000.00
Investment in S Ltd - 64 000 ordinary capital	$ 130,000.00
Investment in S Ltd: Loan	$ 50,000.00
Inventory	$ 65,000.00	$ 55,000.00
Accounts Receivable	$ 55,000.00	$ 35,000.00
Bank	$ 30,000.00
Total assets	$ 410,000.00	$ 240,000.00
EQUITY AND LIABILITIES
Contributed equity	$ 100,000.00	$ 80,000.00
Retained income	$ 165,000.00	$ 90,000.00
Long term loans	$ 75,000.00
Loan from H Ltd		$ 50,000.00
Accounts Payables	$ 70,000.00	$ 10,000.00
Bank overdraft		$ 10,000.00
Total equity and liability	$ 410,000.00	$ 240,000.00
Extract Statement of Comprehensive Income for the period ending 31 December 20.7	H Ltd	S Ltd
Sales	$ 130,000.00	$ 100,000.00
Profit before tax	$ 130,000.00	$ 100,000.00
Tax	-$ 36,000.00	-$ 30,000.00
Profit for the year	$ 94,000.00	$ 70,000.00
Extract Statement of Changes in Equity for the period ending 31 December 20.7	H Ltd	S Ltd
Balance 1 January 20.7	$ 107,000.00	$ 20,000.00
Movement in equity for the year:
Dividends	-$ 36,000.00
Total comprehensive income for the year	$ 94,000.00	$ 70,000.00
Balance 31 December 20.7	$ 165,000.00	$ 90,000.00

Required:

1. Prepare the consolidation worksheet and relevant financial statements. You can access the file from Moodle. (24 marks)

(c) Assume $5,000 of unrealised profit was part of stock of the group and the tax rate is 28%. Provide the journal entries with narrations for this transaction (do not show this on your consolidation worksheet) (6 marks)

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