Case 2: Consolidation worksheet, previously held investment in subsidiary

On 1 August 2018, ITP Syd Ltd acquired 10% of the shares in Peters Ltd for $8000. ITP Syd Ltd used the fair value method to measure this investment with movements in fair value being recognised in profit or loss. At 1 July 2017, the fair value of this investment was $15 400. The original investment in Peters Ltd was due to the fact that Peters Ltd was undertaking research into particular microbiological elements that could influence the profitability of ITP Syd Ltd. With the continuing success of this research, ITP Syd Ltd decided to acquire the remaining shares (cum div.) in Peters Ltd.

On 1 July 2017, ITP Syd Ltd made an offer to buy the remaining shares in Peters Ltd for $151 000 cash. This offer was accepted by the shareholders of Peters Ltd. On 1 July 2017, immediately after the business combination, the statement of financial position of Peters Ltd was as follows:

On analysing the financial statements of Peters Ltd, ITP Syd Ltd determined that all the assets and liabilities recorded by Peters Ltd were shown at amounts equal to their fair values except for:

The plant and equipment is expected to have a further 4-year life and is depreciated on a straightline basis. The inventory was all sold by 30 June 2018.

Peters Ltd had expensed all the outlays on research and development. ITP Syd Ltd placed a fair value of $12 000 on this asset. Peters Ltd also had reported a contingent liability at 30 June 2017 in relation to claims by customers for damaged goods. ITP Syd Ltd placed a fair value of $3000 on these claims. The research and development is amortised evenly over a 10-year period. The claims by customers were settled in May 2018 for $2800. 

The company tax rate is 30%.

Required

(a) Prepare the consolidated financial statements of ITP Syd Ltd at 1 July 2017, immediately after the business combination.

(b) Prepare the consolidation worksheet entries at 30 June 2018.