Myer Ltd acquired all the issued shares of Thompson Ltd on 1 July 2018 for $200 000. At this date Thompson Ltd recorded a dividend payable of $25 000 and equity of:
Share capital $ 54 000 Retained earnings 36 000 Asset revaluation surplus 18 000
All the identifiable assets and liabilities of Thompson Ltd were recorded at amounts equal to their fair values at acquisition date except for:
Inventory Machinery (cost $100 000)
Carrying amount $ 10 MO 80 000
Fair value $ 12 000 85 000
The machinery was considered to have a further 5-year life. Of the inventory, 80% was sold by 30 June 2019. The remainder was sold by 30 June 2020. Both Thompson Ltd and Myer Ltd use the valuation method to measure the land. In May 2019, Thompson Ltd transferred $3000 from the retained earnings at 1 July 2018 to General reserve. The tax rate is 30%. The following information was provided by the two companies at 30 June 2019.