Reference no: EM132685365

The accountant of Patrick Ltd needs to prepare consolidated financial statements for Patrick Ltd at the end of financial year. Following information was available on 30 June 2020:

1. Patrick Ltd acquired 100 per cent interest in Sand Ltd for $760,000 on 1 July 2015. All assets and liabilities were fairly valued on the acquisition date. At the date of acquisition, the equity of Sand Ltd included:Share capital $320,000
Reserve $170,000
Retained earnings $230,000
The balance of the investment account was $760,000 as shown in the Statement of Financial Position of Patrick Ltd on 30 June 2020.

2. On 3 March 2020, Patrick Ltd sold inventory to Sand Ltd at a value of $650,000.

3. The above inventory had a cost of $470,000 for Patrick Ltd to produce. All inventories remained unsold in Sand Ltd on 30 June 2020. Patrick Ltd and Sand Ltd adopt the perpetual inventory system for inventory accounting. The income tax rate is 30%.

4. On May 2020, Sand Ltd sold a machine to Patrick Ltd for $520,000. The machine has the same useful life after the sale. Sand Ltd purchased the machine at $600,000 1 year ago with useful life of 6 years, no residual value is recorded.

Required: (Narrations are required in this question)

Question 1: Determine the amount of goodwill acquired.

Question 2: Prepare relevant consolidation journal entries on 30 June 2020.