On 1 July 2013, Rock Ltd acquired (ex div.) all of the issues capital of Wallaby Ltd. The recorded equity of Wallaby Ltd at this date consisted of

On 1 July 2013, Rock Ltd acquired (ex div.) all of the issues capital of Wallaby Ltd. The recorded equity of Wallaby Ltd at this date consisted of:

Share capital $120,000

General reserve    25,000

Retained earnings    55,000

At 1 July 2013, all the identifiable assets and liabilities of Wallaby Ltd were recorded at fair value except for the following assets:

Caring amount Fair value

Land $100 000 $130 000

Inventory 78 500 86 100

Machinery (cost $86 000) 52 000 56 000

Vehicles (cost $58 000) 47 000 53 000

Additionally, Wallaby Ltd’s records showed a dividend payable at 1July 2013 of $8000. This dividend was paid on 31 October 2013. The assets of Wallaby Ltd at acquisition date included goodwill recorded at $15 000 arising from a business combination transaction in 2009. At 1 July 2013, Wallaby Ltd owned but has no recorded an internally generated brand name.

This brand name was considered by Rock Ltd to have fair value of $29 000 and an indefinite useful life. An impairment test conducted with respect to the brand name on 30 June 2016 concluded that its recoverable amount at that date was $2000 less than its carrying amount.

The vehicle and machinery were expected to have a further useful life of 6 and 8 years respectively, with benefits to be received evenly over those periods. Inventory on hand at 1 July 2013 was all sold by 31 January 2014. The machinery owned at 1 July 2013 was sold on 1 January 2016 for $38 000.

Adjustments for the differences between carrying amount and fair value of assets and liabilities on hand at acquisition date are recognised on consolidation. When assets are sold or derecognised, any related valuation reserves are transferred to retained earnings. In June 2015, Wallaby Ltd paid a share dividend worth $20 000 from the general reserve on hand at 1 July 2013. The trial balances of both companies at 30 June 2016 showed the following balances:

Debit balance Rock Ltd Wallaby Ltd

Cash $   2 500 $   1 250

Receivables 27 000 13 000

Inventory 39 700 24 500

Other current assets 15 200 8 200

Deferred tax assets 7 500 3 500

Vehicles 88 000 158 000

Equipment _ 42 000

Land 140 000 180 000

Financial assets 68 000 14 800

Goodwill 28 000 15 000

Share in Wallaby Ltd 250 000 _

Debenture in Rock Ltd _ 25 000

Dividend paid 10 000 5 000

Dividend declared 20 000 12 000

Transfer to general reserve 10 000 5 000

Cost of sale 210 000 192 550

Income tax expense 30 000 32 000

Depreciation and other expense 39 000 36 000

Carrying amount of machinery sold _ 30 500

Carrying amount of equipment sold 21 000 ______

$1 005 900 $798 300

Credit balance Rock Ltd Wallaby Ltd

Share capital $200 000 $140 000

General reserve 35 000 10 000

Retain earning (1/7/15) 51 300 67 500

Account payable 69 500 36 000

Loan payable (due 30/6/20) 25 000 15 000

Dividend payable 20 000 12 000

Provisions 12 500 9 300

Current tax liability 43 000 34 000

Deferred tax liability 11 800 5 000

Accumulated depreciation-vehicles 16 400 60 000

Accumulated depreciation-equipment - 34 500

8% debentures (matures 30/6/19) 25 000 -

Sales revenue 450 000 320 000

Dividend revenue 17 000 -

Other income 11 400 17 000

Proceeds on sale equipment 18 000 -

Proceeds on sale machinery - 38 000

$1 005 900 $798 300

Additional information

a. Dividend may be declared by either company without shareholder approval.

b. The tax rate is 30%

c. On 1 January 2016, Rock Ltd sold an item of equipment to Wallaby Ltd for $18 000. The equipment has a carrying amount at the date of sale of $ 21 000. Both companies depreciate equipment at 20% p.a. on a straight-line basis.

d. On 1 May 2015, Wallaby Ltd sold a machine to Rock Ltd for $7 800. The machine has a carrying amount of $7 000 at the day of sale. Rock Ltd recorded the machine as inventory. The inventory item was sold to an external party in November 2015 for $8 200.

e. All interest on the 8% debentures has been paid and brought to account in the records of both companies.

f. During the 2015-16 financial year, Rock Ltd sold inventory to Wallaby Ltd for $75000. The cost of this inventory to Wallaby Ltd was $70 000. Of this inventory, 25% is still on hand at 30 June 2016.

g. The transfer to general reserve recorded by Wallaby Ltd in the current year was from retained earning recorded at 1 July 2013.

Required 

Prepare the consolidation worksheet journal entries for the preparation of the consolidated financial statement of Rock Ltd at 30 June 2016.