Reference no: EM132462476

On 1 July 2019, Mutt Ltd acquired all the issued shares of Jeff Ltd for $174 800. At this date the equity of Jeff Ltd consisted of share capital of $80 000 and retained earnings of $68 800. All the identifiable assets and liabilities of Jeff Ltd were recorded at amounts equal to fair value except for:

                               Carrying amount                     Fair Value

Patent                          60 000                              72000

Plant(cost 80000)            40 000                             48000

Inventories                      21600                               28000

The patent was considered to have an indefinite life. It was estimated that the plant had a further life of 10 years, and was depreciated on a straight-line basis. All the inventories were sold by 30 June 2020.

• In May 2020, Jeff Ltd transferred $20 000 from the retained earnings on hand at 1 July 2019 to a general reserve. In June 2020, Jeff Ltd conducted an impairment test on the patent and on the goodwill acquired. As a result, the goodwill was considered to be impaired by $1200. The tax rate is 30%.

Required

Question 1. Prepare the acquisition analysis at 1 July 2019.

Question 2. Prepare the consolidation worksheet entries for Mutt Ltd's group at 1 July 2019.