| Particulars | Carrying Amount | Fair Value | Net Fair Value |
| Share Capital | $100,000 | $100,000 | |
| Retained Earnings | $175,000 | $175,000 | |
| Plant | $90,000 | $120,000 | $30,000 |
| Computer Equipment | $40,000 | $60,000 | $20,000 |
| Net Fair Value of Identifiable Assets & Liabilities | $130,000 | $455,000 | $325,000 |
| Add: Amount paid over Equity | $250,000 | ||
| Consideration Transferred | $575,000 | ||
| Goodwill | $250,000 |
In the books of Panda Ltd.
Journal Entries
| Dr. | Cr. | |||
| Date | Particulars | Amount | Amount | |
| 7/1/2017 | Accumulated Depreciation – Plant A/c. | Dr. | $90,000 | |
| Plant A/c. | $60,000 | |||
| Business Valuation Combination Reserve A/c. | $30,000 | |||
| Accum. Dep.- Computer Equipment A/c. | Dr. | $50,000 | ||
| Computer Equipment A/c. | $30,000 | |||
| Business Valuation Combination Reserve A/c. | $20,000 | |||
| Goodwill A/c. | Dr. | $250,000 | ||
| Business Valuation Combination Reserve A/c. | $250,000 |
In the books of Panda Ltd.
Journal Entries
| Dr. | Cr. | |||
| Date | Particulars | Amount | Amount | |
| 7/31/2017 | Depreciation Expense A/c. | Dr. | $36,000 | |
| Accumulated Depreciation – Plant A/c. | $24,000 | |||
| Accum. Dep.- Computer Equipment A/c. | $12,000 | |||
| Pre-Acquisition Entry: | ||||
| Share Capital A/c. | Dr. | $100,000 | ||
| Retained Earnings A/c. | Dr. | $175,000 | ||
| Business Valuation Combination Reserve A/c. | Dr. | $300,000 | ||
| Shares in Smarty Ltd. A/c. | $575,000 |
| Particulars | Carrying Amount | Fair Value | Tax Rate | Net Fair Value |
| Share Capital | $120,000 | $120,000 | ||
| General Reserve | $25,000 | $25,000 | ||
| Retained Earnings | $55,000 | $55,000 | ||
| Land | $100,000 | $130,000 | 30% | $21,000 |
| Inventories | $78,500 | $86,100 | 30% | $5,320 |
| Machinery | $52,000 | $56,000 | 30% | $2,800 |
| Vehicles | $47,000 | $53,000 | 30% | $4,200 |
| Brand | $29,000 | 30% | $20,300 | |
| Goodwill | $15,000 | -$15,000 | ||
| Net Fair Value of Identifiable Assets & Liabilities | $292,500 | $554,100 | $238,620 | |
| Consideration Transferred | $250,000 | |||
| Goodwill | $11,380 |
In the books of Ping Pong Ltd. Ltd.
Journal Entries
| Dr. | Cr. | |||
| Date | Particulars | Amount | Amount | |
| Business Combination Entries: | ||||
| Accumulated Depreciation – Vehicles A/c. | Dr. | $11,000 | ||
| Vehicles A/c. | $5,000 | |||
| Deferred Tax Liability A/c. | $1,800 | |||
| Business Valuation Combination Reserve A/c. | $4,200 | |||
| Depreciation Expense A/c. | Dr. | $1,000 | ||
| Retained Earnings (1/7/2017) A/c. | Dr. | $2,000 | ||
| Accumulated Depreciation – Vehicles A/c. | $3,000 | |||
| Deferred Tax Liability A/c. | Dr. | $900 | ||
| Income Tax Expense A/c. | $300 | |||
| Retained Earnings (1/7/2017) A/c. | $600 | |||
| Depreciation Expense A/c. | $250 | |||
| Gain on Sale of Machinery A/c. | $5,250 | |||
| Retained Earnings (1/7/2017) A/c. | $700 | |||
| Income Tax Expenses A/c. | $2,250 | |||
| Trasnfer from BCVR A/c. | $3,950 | |||
| Brand A/c. | $29,000 | |||
| Deferred Tax Liability A/c. | $8,700 | |||
| Business Valuation Combination Reserve A/c. | $20,300 | |||
| Goodwill A/c. | $11,380 | |||
| Business Valuation Combination Reserve A/c. | $11,380 | |||
| Pre-Acquisition Entries: | ||||
| 7/1/2015 | Share Capital A/c. | $120,000 | ||
| General Reserve A/c. | $25,000 | |||
| Retained Earnings A/c. | $55,000 | |||
| Business Valuation Combination Reserve A/c. | $50,000 | |||
| Shares in Sing Song Ltd. A/c. | $250,000 | |||
| 31/6/2018 | Share Capital A/c. | $120,000 | ||
| General Reserve A/c. | $10,000 | |||
| Retained Earnings (1/7/2017) A/c. | $76,320 | |||
| Business Valuation Combination Reserve A/c. | $43,680 | |||
| Shares in Sing Song Ltd. A/c. | $250,000 | |||
| Transfer from BCVR A/c. | $3,950 | |||
| Business Valuation Combination Reserve A/c. | $3,950 | |||
| Retained Earnings (1/7/2015) A/c. | $5,000 | |||
| Transfer to General Reserve A/c. | $5,000 | |||
| Transfer from BCVR A/c. | $21,000 | |||
| Retained Earnings (1/7/2017) A/c. | $21,000 | |||
| Transfer from BCVR A/c. | $5,320 | |||
| Retained Earnings (1/7/2017) A/c. | $5,320 | |||
| Sale of Equipment: | ||||
| Equipment A/c. | $3,000 | |||
| Income Tax Expenses A/c. | $900 | |||
| Loss on Sale of Equipment A/c. | $2,100 | |||
| Depreciation Expense A/c. | $300 | |||
| Retained Earnings (1/7/2017) A/c. | $1,500 | |||
| Accumulated Depreciation A/c. | $1,800 | |||
| Deferred Tax Asset A/c. | $540 | |||
| Income Tax Expense A/c. | $90 | |||
| Retained Earnings (1/7/2017) A/c. | $450 | |||
| Transfer of Machine to Inventory: | ||||
| Gain on Sale of Machinery A/c. | $800 | |||
| Cost of Sales A/c. | $800 | |||
| Deferred Tax Asset A/c. | $240 | |||
| Income Tax Expense A/c. | $240 | |||
| Sale of Debentures: | ||||
| 8% Debentures A/c. | $25,000 | |||
| Debentures in Ping Pong Ltd. A/c. | $25,000 | |||
| Profit in Closing Inventories: | ||||
| Sales Revenue A/c. | $75,000 | |||
| Cost of Sales A/c. | $73,750 | |||
| Inventory A/c. | $1,250 | |||
| Deferred Tax Asset A/c. | $375 | |||
| Income Tax Expense A/c. | $375 | |||
| Dividend Paid: | ||||
| Dividend Revenue A/c. | $5,000 | |||
| Dividend Paid A/c. | $5,000 | |||
| Dividend Payable: | ||||
| Dividend Payable A/c. | $12,000 | |||
| Receivables A/c. | $12,000 | |||
| Receivables A/c. | $12,000 | |||
| Dividend Payable A/c. | $12,000 |
Collis, J. (2015). Financial Accounting. Macmillan International Higher Education
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU.
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