Inventory Sales And Plant Transactions Between Tuna Ltd And Brim Ltd

Acquisition analysis for Tuna Ltd.
As on 1 July, 2015

Particulars	Calculation basis	Amount	Amount
Share Capital			$ 66,000
Retained Earnings			$ 6,000
Fair value:
– Plant	((123000-120000)*(1-30%))		$ 2,100
– Patent	((105000-90000)*(1-30%))		$ 10,500
– Inventory	((22500-18000)*(1-30%))		$ 3,150
Net fair value of assets acquired – (a)			$ 87,750

Consideration paid – (b)
– In cash		$ 30,000
– In shares		$ 60,000	$ 90,000

Goodwill (b-a)			$ 2,250


	Consolidation Journal Entries for Tuna Ltd.
	As on 30 June, 2017

I	Pre Acquisition entry as on 1/7/15


	Particulars	Debit	Credit
	Share Capital	$ 66,000
	Retained Earnings	$ 6,000
	Goodwill	$ 2,250
	Businee Combination Valuation Reserve	$ 15,750
	To Shares in Brim Ltd.		$ 90,000


II	Pre Acquisition entry as on 30/6/17


JV	Particulars	Debit	Credit
I	Share Capital	$ 66,000
	Retained Earnings	$ 19,650
	Goodwill	$ 2,250
	Businee Combination Valuation Reserve	$ 2,100
	To Shares in Brim Ltd.		$ 90,000


III	Business Combination Valuation Entries


JV	Particulars	Debit	Credit
II	Accumulated Depreciation	$ 30,000
	To Plant		$ 27,000
	To Deferred tax liability		$ 900
	To Business Combination Valuation Reserve		$ 2,100
	(To record fair value of the plant)

III	Depreciation (3000/5)	$ 600
	Retained earnings (1/7/16)	$ 600
	To Accumulated Depreciation		$ 1,200
	(To record depreciation on above fair valuation)

	Deferred tax liablility	$ 360
	To Income tax expense		$ 180
	To Retained earnings (1/7/16)		$ 180
	(To record income tax impact on above)


IV	Other consolidation entries


JV	Particulars	Debit	Credit
IV(a)	Sales revenue	$ 21,000
	To Cost of sales		$ 21,000
	(To record elimination of inter company sale of inventory)

	Retained earnings (1/7/16)	$ 420
	Income tax expense	$ 180
	To Cost of sales		$ 600
	(To record elimination of profit in opening inventory)

IV(b)	Sales revenue	$ 4,500
	To Cost of sales		$ 4,200
	To Inventory		$ 300
	(To record elimination of profit in closing inventory)

	Deferred tax asset	$ 90
	To Income tax expense		$ 90
	(To record income tax impact on above)

IV(c)	Proceeds on sale of Plant	$ 15,000
	To Carrying amount of plant sold		$ 14,000
	To Plant		$ 1,000
	(To record elimination of profit in inter company sale of plant)

	Deferred tax asset	$ 300
	To Income tax expense		$ 300
	(To record income tax impact on above)

	Accumulated Depreciation (1000*10%)	$ 100
	To Depreciation		$ 100
	(To record reversal of excess depreciation charged)

	Income tax expense	$ 30
	To Deferred tax asset		$ 30
	(To record income tax impact on above)

IV(d)	Retained earnings (1/7/16)	$ 1,400
	Deferred tax asset	$ 600
	To Plant (18000-16000)		$ 2,000
	(To record elimination of unrealised profit)

	Accumulated depreciation	$ 1,000
	To Depreciation expense (2000*20%)		$ 400
	To Retained earnings (1/7/16) (200020%1.5)		$ 600
	(To record reversal of excess depreciation charged)

	Income tax expense	$ 120
	Retained earnings (1/7/16)	$ 180
	To Deferred tax asset		$ 300
	(To record deferred tax impact on above)

IV(e)	Proceeds on sale of Plant	$ 9,000
	To Carrying amount of plant sold		$ 7,500
	To Cost of sales		$ 1,500
	(To record elimination of unrealised profit)



Consolidated set of financial statements


	Tuna Ltd.	Brim Ltd.	Journal number	Adjustments	Journal number	Group
Dr	Cr
Sales revenue	64,500	78,000	IV(a),IV(b)	25,500			1,17,000
Cost of sales	30,900	46,350			27,300	IV(a),IV(b),IV(e)	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	III	600	500	IV(c),IV(d)	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	IV(c),IV(e)	24,000			–
Carrying amount of plant sold	7,500	14,000			21,500	IV(c),IV(e)	–
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	IV(a),IV(c),IV(d)	330	570	III,IV(b),IV(c)	18,160
Profit	9,450	8,400					17,290
Retained earnings (1/7/16)	48,000	31,500	I,III,IV(a),IV(d)	22,250	780	III,IV(d)	58,030

Retained earnings (30/6/17)	57,450	39,900					75,320
Share capital	96,000	66,000	I	66,000			96,000
BCVR	–	–	I	2,100	2,100	II	–
Total equity	1,53,450	1,05,900					1,71,320

Current liabilities	21,100	10,500					31,600
Deferred tax liability	11,000	15,000	III	360	900	II	26,540
Total liabilities	32,100	25,500					58,140
Total equity and liabilities	1,85,550	1,31,400					2,29,460

Plant	57,000	1,07,250			30,000	II,IV(c),IV(d)	1,34,250
Accumulated depreciation	(18,300)	(33,450)	II,IV(c),IV(d)	31,100	1,200	III	(21,850)
Intangibles	12,000	11,100					23,100
Shares in Brim Ltd	90,000	–			90,000	I	–
Deferred tax asset	8,100	9,450					17,550
Inventory	28,500	24,600			300	IV(b)	52,800
Receivables	8,250	12,450					20,700
Goodwill	–	–	I	2,250			2,250
Deferrec tax asset	–	–	IV(b),IV(c),IV(d)	990	330	IV(c),IV(d)	660
Total assets	1,85,550	1,31,400					2,29,460

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