On 1 July 2007, Kwok Ltd acquired all the shares of Chu Ltd. Additional information:
(a) At 1 July 2007, all identifiable assets and liabilities of Chu Ltd were recorded at fair values except for inventory, and plant and machinery. The fair value of inventory was $1,000 greater than its carrying amount. This inventory was all sold to external parties in the year ending 30 June 2009. At acquisition date, Chu Ltd had plant & machinery which had a carrying amount of 15,000 and fair value of 16,000. The original cost of this plant and machinery was $17,000. This plant and machinery, which had a further 5 year life at acquisition date, was sold on 1 January 2009. At 1 July 2007, Chu Ltd had an unrecorded patent with an indefinite useful life. On that date, Kwok Ltd measured the fair value of the patent at $8 000. By 30 June 2009, it was assessed that $2,000 of the patent was not recoverable. At 1 July 2007, Chu Ltd had not recorded a liability relating to a guarantee that was considered to have a fair value of $7,000. An amount of $5 000 was paid by Chu Ltd on 26th June 2009 in part payment of this liability. The balance of this liability was still considered to be $2,000 at 30 June 2009. At 1 July 2007, Chu Ltd had not recorded any goodwill. Valuation adjustments are made on consolidation and, on realisation of a business combination valuation reserve, a transfer is made to retained earnings on consolidation.
(b) During the 2007-2008 year, Chu Ltd transferred $5,000 to its General Reserve from profits earned prior to acquisition date.
(c) For the year ending 30 June 2008, the profit after tax for Chu Ltd was $17,000 from which a dividend of $5,000 was paid in that year.
(d) The debentures were issued by Chu Ltd at nominal value on 1 July 2008, and are redeemable on 30 June 2013. Kwok Ltd acquired its holdings ($60 000) of these debentures on the open market on 1