ACC204 Corporate Accounting And Reporting
Requirement 1)
|
|
Amount |
Amount |
Amount |
Purchase Consideration |
|
|
$555,000 |
|
LESS: |
|
|
|
|
Share capital |
|
$222,000 |
|
|
Asset revaluation reserve |
|
$166,500 |
|
|
Retained earnings |
|
$83,250 |
|
|
Inventories - Fair Value |
$18,400 |
|
|
|
Less: Inventories - Carrying amount |
$16,700 |
|
|
|
|
$1,700 |
|
|
|
Less: Tax Adjustment @ 30% |
$510 |
$1,190 |
|
|
Land - Fair Value |
$46,000 |
|
|
|
Less: Land - Carrying amount |
$42,000 |
|
|
|
|
$4,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$1,200 |
$2,800 |
|
|
Machinery - Fair Value |
$62,000 |
|
|
|
Less: Machinery - Carrying amount |
$52,000 |
|
|
|
|
$10,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$3,000 |
$7,000 |
|
|
Contingent Liability - Fair Value |
-$7,000 |
|
|
|
Less: Tax Adjustment @ 30% |
-$2,100 |
-$4,900 |
|
|
Patent - Fair Value |
$17,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$5,100 |
$11,900 |
|
|
Research & Development - Fair Value |
$13,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$3,900 |
$9,100 |
|
|
Net fair value of identifiable assets & liabilities |
|
|
$498,840 |
|
Goodwill acquired by Tom Ltd. |
|
|
$56,160 |
Requirement 2)
Date |
|
Accounts |
Amount |
Amount |
|
01 July 2020 |
|
BCVR Entries: |
|
|
|
|
Dr. |
Inventories |
$1,700 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$1,190 |
|
|
Cr. |
Deferred Tax Liabilities |
|
$510 |
|
|
Dr. |
Land |
$4,000 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$2,800 |
|
|
Cr. |
Deferred Tax Liabilities |
|
$1,200 |
|
|
Dr. |
Accumulated Depreciation - Machinery |
$13,000 |
|
|
|
Cr. |
Machinery |
|
$3,000 |
|
|
Cr. |
Business Combination Valuation Reserve |
|
$7,000 |
|
|
Cr. |
Deferred Tax Liabilities |
|
$3,000 |
|
|
Dr. |
Business Combination Valuation Reserve |
$4,900 |
|
|
|
Dr. |
Deferred Tax Assets |
$2,100 |
|
|
|
Cr. |
Contingent Liabilities |
|
$7,000 |
|
|
Dr. |
Patent |
$17,000 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$11,900 |
|
|
Cr. |
Deferred Tax Liabilities |
|
$5,100 |
|
|
Dr. |
Research & Development |
$13,000 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$9,100 |
|
|
Cr. |
Deferred Tax Liabilities |
|
$3,900 |
|
|
Dr. |
Goodwill |
$56,160 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$56,160 |
|
|
|
Pre-Acquisition Entry: |
|
|
|
|
Dr. |
Share capital |
$222,000 |
|
|
|
Dr. |
Asset revaluation reserve |
$166,500 |
|
|
|
Dr. |
Retained earnings |
$83,250 |
|
|
|
Dr. |
Business Combination Valuation Reserve |
$83,250 |
|
|
|
Cr. |
Shares in Rod Ltd. |
|
$555,000 |
Requirement 3)
Date |
|
Accounts |
Amount |
Amount |
30 June 2021 |
|
BCVR Entries: |
|
|
|
|
Dr. |
Inventories |
$1,360 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$952 |
|
|
Cr. |
Deferred Tax Liabilities |
|
$408 |
|
|
Dr. |
Cost of Sales |
$340 |
|
|
|
Cr. |
Income Tax Expense |
|
$68 |
|
|
Cr. |
Transfer from BCVR |
|
$272 |
|
|
Dr. |
Depreciation Expense |
$2,000 |
|
|
|
Cr. |
Accumulated Depreciation - Machinery |
|
$2,000 |
|
|
Dr. |
Deferred Tax Liabilities |
$600 |
|
|
|
Cr. |
Income Tax Expense |
|
$600 |
|
|
|
Pre-Acquisition Entry: |
|
|
|
|
Dr. |
Transfer from BCVR |
$272 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$272 |
Requirement 4)
|
Date |
|
Accounts |
Amount |
Amount |
|
30 June 2021 |
|
Sale Of Vehicle - Rod Ltd To Tom Ltd.: |
|
|
|
|
Dr. |
Gain on Sale of Assets |
$2,380 |
|
|
|
Cr. |
Vehicle |
|
$2,380 |
|
|
Dr. |
Deferred Tax Assets |
$714 |
|
|
|
Cr. |
Income Tax Expense |
|
$714 |
|
|
Dr. |
Accumulated Depreciation - Vehicle |
$238 |
|
|
|
Cr. |
Depreciation Expense |
|
$238 |
|
|
Dr. |
Income Tax Expense |
$71 |
|
|
|
Cr. |
Deferred Tax Assets |
|
$71 |
|
|
|
Sale Of Inventory On Credit - Tom Ltd To Rod Ltd: |
|
|
|
|
Dr. |
Sales Revenue |
$46,000 |
|
|
|
Cr. |
Cost of Sales |
|
$41,400 |
|
|
Cr. |
Inventory |
|
$4,600 |
|
|
Dr. |
Deferred Tax Assets |
$1,380 |
|
|
|
Cr. |
Income Tax Expense |
|
$1,380 |
|
|
Dr. |
Accounts Payable |
$46,000 |
|
|
|
Cr. |
Accounts Receivable |
|
$46,000 |
|
|
|
Sale Of Inventory In Cash - Rod Ltd To Tom Ltd: |
|
|
|
|
Dr. |
Sales Revenue |
$54,000 |
|
|
|
Cr. |
Cost of Sales |
|
$37,800 |
|
|
Cr. |
Inventory |
|
$16,200 |
|
|
Dr. |
Deferred Tax Assets |
$4,860 |
|
|
|
Cr. |
Income Tax Expense |
|
$4,860 |
|
|
|
Sale Of Inventory In Cash - Tom Ltd To Rod Ltd: |
|
|
|
|
Dr. |
Sales Revenue |
$48,000 |
|
|
|
Cr. |
Cost of Sales |
|
$45,120 |
|
|
Cr. |
Inventory |
|
$2,880 |
|
|
Dr. |
Deferred Tax Assets |
$864 |
|
|
|
Cr. |
Income Tax Expense |
|
$864 |
|
|
|
Dividend Paid By Rod Ltd: |
|
|
|
|
Dr. |
Dividend Revenue |
$12,000 |
|
|
|
Cr. |
Dividend Paid |
|
$12,000 |
Requirement 5)
As per AASB 10, if any company owns 50% or more than 50% shares of any other company, then it has to prepare consolidated financial statements by including the revenues, expenses, assets, liabilities and equity items of the subsidiary company proportionately. In this case, as Tom Ltd owns 93% of the outstanding shares of Rod Ltd., then as per AASB standards, it has to consolidate the financial items of both the companies. The rest of shareholders in Rod Ltd would be treated as minority interest and to adjust their dues, the following adjustments should be made in the above-mentioned requirements:
|
|
Amount |
Amount |
Amount |
Purchase Consideration |
|
|
$555,000 |
|
LESS: |
|
|
|
|
Share capital |
|
$222,000 |
|
|
Asset revaluation reserve |
|
$166,500 |
|
|
Retained earnings |
|
$83,250 |
|
|
Inventories - Fair Value |
$18,400 |
|
|
|
Less: Inventories - Carrying amount |
$16,700 |
|
|
|
|
$1,700 |
|
|
|
Less: Tax Adjustment @ 30% |
$510 |
$1,190 |
|
|
Land - Fair Value |
$46,000 |
|
|
|
Less: Land - Carrying amount |
$42,000 |
|
|
|
|
$4,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$1,200 |
$2,800 |
|
|
Machinery - Fair Value |
$62,000 |
|
|
|
Less: Machinery - Carrying amount |
$52,000 |
|
|
|
|
$10,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$3,000 |
$7,000 |
|
|
Contingent Liability - Fair Value |
-$7,000 |
|
|
|
Less: Tax Adjustment @ 30% |
-$2,100 |
-$4,900 |
|
|
Patent - Fair Value |
$17,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$5,100 |
$11,900 |
|
|
Research & Development - Fair Value |
$13,000 |
|
|
|
Less: Tax Adjustment @ 30% |
$3,900 |
$9,100 |
|
|
Net fair value of identifiable assets & liabilities |
|
|
$498,840 |
|
ADD: |
|
|
|
|
Non-Controlling Interest @7% of NFVINA |
|
|
$34,919 |
|
Goodwill acquired by Tom Ltd. |
|
|
$91,079 |
|
Date |
|
Accounts |
Amount |
Amount |
|
01 July 2020 |
|
BCVR Entry: |
|
|
|
|
Dr. |
Goodwill |
$91,079 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$91,079 |
|
|
|
Pre-Acquisition Entry: |
|
|
|
|
Dr. |
Share capital |
$206,460 |
|
|
|
Dr. |
Asset revaluation reserve |
$154,845 |
|
|
|
Dr. |
Retained earnings |
$77,423 |
|
|
|
Dr. |
Business Combination Valuation Reserve |
$116,273 |
|
|
|
Cr. |
Shares in Rod Ltd. |
|
$555,000 |
|
|
|
NCI Allocation: |
|
|
|
|
Dr. |
Share capital |
$15,540 |
|
|
|
Dr. |
Asset revaluation reserve |
$11,655 |
|
|
|
Dr. |
Retained earnings |
$5,828 |
|
|
|
Dr. |
Business Combination Valuation Reserve |
$1,896 |
|
|
|
Cr. |
NCI |
|
$34,919 |
|
30 June 2021 |
|
Pre-Acquisition Entry: |
|
|
|
|
Dr. |
Transfer from BCVR |
$253 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$253 |
|
|
|
NCI Share Of Equity: |
|
|
|
|
Dr. |
Non-Controlling Interest |
$117 |
|
|
|
Cr. |
NCI Share of Profit |
|
$117 |
|
|
Dr. |
Transfer from BCVR |
$19 |
|
|
|
Cr. |
Business Combination Valuation Reserve |
|
$19 |
|
30 June 2021 |
|
Sale Of Vehicle - Rod Ltd To Tom Ltd.: |
|
|
|
|
Dr. |
Non-Controlling Interest |
$117 |
|
|
|
Cr. |
NCI Share of Profit |
|
$117 |
|
|
|
(for Gain on sale of assets) |
|
|
|
|
Dr. |
NCI Share of Profit |
$12 |
|
|
|
Cr. |
Non-Controlling Interest |
|
$12 |
|
|
|
(for Depreciation expenses adjusted) |
|
|
|
|
|
Sale Of Inventory In Cash - Rod Ltd To Tom Ltd: |
|
|
|
|
Dr. |
Non-Controlling Interest |
$794 |
|
|
|
Cr. |
NCI Share of Profit |
|
$794 |
|
|
|
Dividend Paid By Rod Ltd: |
|
|
|
|
Dr. |
Dividend Revenue |
$11,160 |
|
|
|
Cr. |
Dividend Paid |
|
$11,160 |
|
|
Dr. |
Non-Controlling Interest |
$840 |
|
|
|
Cr. |
Dividend Paid |
|
$840 |
Requirement 6)
Part A
Consolidated financial statement of parent company and subsidiary company helps in preparing consolidated worksheet. Consolidation adjustment are made for goodwill, balances and internal transactions. Consolidated worksheet shows consolidation of financial details of all subsidiary including parent company and one balance sheet is prepared for whole group (Carini et al. 2018). In other words, consolidation adjustment helps in adding assets, liabilities, results of parent company and subsidiary company. Adjustment in consolidated worksheet is very necessary as book value of parent as well as subsidiary company is shown individually. Adjustment in consolidation worksheet is also important for the purpose of consolidation. Therefore, consolidated worksheet adjustment is necessary as all important adjustments and values of final consolidation and elimination are disclosed properly. It also helps in saving money as well as operating more efficiently.
Part B
Preparation of consolidated worksheet adjustment is done when more than 50 per cent of shares of subsidiary company is hold by parent company. Parent company is qualified for using consolidated worksheet when 20% is held by them. In other words, preparation of consolidated financial statement is done when ownership interest of one company in business is provided with majority of voting power. Therefore, it can be said that consolidated worksheet adjustment is necessary one company owns 50% of outstanding stock of other company.
Part C
In consolidated worksheet all adjustment related to consolidation are disclosed. Consolidation worksheet is mainly prepared when consolidation account is calculated. In other words, when calculation of consolidation account over number of years is prepared then each time preparation of consolidated worksheet is done. While posting consolidated worksheet adjustment, investment in subsidiary is not taken into consideration that is they are eliminated. Adjustment related to consolidation are not disclosed in own books of parent or subsidiary company. Therefore, it can be said that consolidated worksheet adjustment is recorded in consolidated worksheet (Robinson 2020).
Part D
For full control and for non-controlling interest the accounting standard that is relevant to consolidation process is IFRS 10. Principles of presentation and preparation of consolidated financial statement is disclosed in IFRS when one or more than one entity is controlled by single entity. According to IFRS 10, consolidated financial statement is a statement which shows assets, liability, equity, income, expense and cash flows of both parent company and subsidiary company (Issakova et al. 2017). All the information is disclosed a one economic entity.
