ACC705 Corporate Accounting And Reporting

Particulars

Calculation basis

 Amount

Share Capital

$66,000

Retained Earnings

$6,000

Fair valuation of Plant

((123000-120000)*(1-30%))

$2,100

Fair valuation of Patent

((105000-90000)*(1-30%))

$10,500

Fair valuation of Inventory

((22500-18000)*(1-30%))

$3,150

Net fair value of assets and liabilities identified

$87,750

Consideration paid in cash

$30,000

Consideration paid in shares

(20,000*3)

$60,000

Goodwill

$2,250

Journal Number

Particulars

 Debit

 Credit

Pre-Acquisition entry as on 1/7/15

Share Capital A/c

$66,000

Retained Earnings A/c

$6,000

Goodwill A/c

$2,250

Business Combination Valuation Reserve A/c

$15,750

Shares in Brim Ltd. A/c

$90,000

1

Pre-Acquisition entry as on 30/6/17

Share Capital A/c

$66,000

Retained Earnings A/c

$19,650

Goodwill A/c

$2,250

Business Combination Valuation Reserve A/c

$2,100

Shares in Brim Ltd. A/c

$90,000

Business Combination Valuation Entries

2

Fair valuation of plant

Accumulated Depreciation A/c

$30,000

Plant A/c

$27,000

Deferred tax liability A/c

$900

Business Combination Valuation Reserve A/c

$2,100

3

Depreciation recorded on above fair valuation

Depreciation (3000/5) A/c

$600

Retained earnings (1/7/16) A/c

$600

Accumulated Depreciation A/c

$1,200

Income tax effect on above depreciation

Deferred tax liability A/c

$360

Income tax expense A/c

$180

Retained earnings (1/7/16) A/c

$180

Other consolidation entries

4

Elimination of intercompany sale transaction

Sales revenue A/c

$21,000

Cost of sales A/c

$21,000

Retained earnings (1/7/16) A/c

$420

Income tax expense A/c

$180

Cost of sales A/c

$600

5

Elimination of intercompany sale & inventory transaction

Sales revenue A/c

$4,500

Cost of sales A/c

$4,200

Inventory A/c

$300

Tax impact on above elimination

Deferred tax asset A/c

$90

Income tax expense A/c

$90

6

Elimination of intercompany sale of plant

Proceeds on sale of Plant A/c

$15,000

Carrying amount of plant sold A/c

$14,000

Plant A/c

$1,000

Tax impact on above elimination

Deferred tax asset A/c

$300

Income tax expense A/c

$300

Depreciation reversal on above transaction

Accumulated Depreciation (1000*10%) A/c

$100

Depreciation  A/c

$100

Tax impact on above depreciation reversal

Income tax expense A/c

$30

Deferred tax asset A/c

$30

7

Elimination of intercompany sale of inventory classified as plant

Retained earnings (1/7/16) A/c

$1,400

Deferred tax asset A/c

$600

Plant (18000-16000) A/c

$2,000

Depreciation reversal on above transaction

Accumulated depreciation A/c

$1,000

Depreciation expense (2000*20%) A/c

$400

Retained earnings (1/7/16) (2000*20%*1.5) A/c

$600

Tax impact on above depreciation reversal

Income tax expense A/c

$120

Retained earnings (1/7/16) A/c

$180

Deferred tax asset A/c

$300

8

Elimination of intercompany sale of plant classified as inventory

Proceeds on sale of Plant A/c

$9,000

Carrying amount of plant sold A/c

$7,500

Cost of sales A/c

$1,500

 Tuna Ltd

 Brim Ltd

Journal number

 Adjustments

Journal  number

 Group

 Dr

 Cr

Sales revenue

$64,500

$78,000

4,5

$25,500

$117,000

Cost of sales

$30,900

$46,350

$27,300

4,5,8

$49,950

Gross profit

$33,600

$31,650

$67,050

Trading expenses

$4,800

$9,000

$13,800

Office expenses

$7,950

$4,050

$12,000

Depreciation

$1,800

$3,900

3

$600

$500

6,7

$5,800

$14,550

$16,950

$31,600

Profit from trading

$19,050

$14,700

$35,450

Proceeds from sale of plant

$9,000

$15,000

6,8

$24,000

$-

Carrying amount of plant sold

$7,500

$14,000

$21,500

6,8

$-

Gain/loss on sale of machinery

$1,500

$1,000

$-

Profit before tax

$20,550

$15,700

$35,450

Tax expense

$11,100

$7,300

4,6,7

$330

$570

3,5,6

$18,160

Profit

$9,450

$8,400

$17,290

Retained earnings (1/7/16)

$48,000

$31,500

1,3,4,7

$22,250

$780

3,7

$58,030

Retained earnings (30/6/17)

$57,450

$39,900

$75,320

Share capital

$96,000

$66,000

1

$66,000

$96,000

BCVR

$-

$-

1

$2,100

$2,100

2

$-

Total equity

$153,450

$105,900

$171,320

Current liabilities

$21,100

$10,500

$31,600

Deferred tax liability

$11,000

$15,000

3

$360

$900

2

$26,540

 Total liabilities

$32,100

$25,500

$58,140

Total equity and liabilities

$185,550

$131,400

$229,460

Plant

$57,000

$107,250

$30,000

2,6,7

$134,250

Accumulated depreciation

$(18,300)

$(33,450)

2,6,7

$31,100

$1,200

3

$(21,850)

Intangibles

$12,000

$11,100

$23,100

Shares in Brim Ltd

$90,000

$-

$90,000

1

$-

Deferred tax asset

$8,100

$9,450

$17,550

Inventory

$28,500

$24,600

$300

5

$52,800

Receivables

$8,250

$12,450

$20,700

Goodwill

$-

$-

1

$2,250

$2,250

Deferred tax asset

$-

$-

5,6,7

$990

$330

6,7

$660

Total assets

$185,550

$131,400

$229,460