Accounting Assignment | Calculate Acquisition Analysis

Added on - 28 May 2020

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Solution 1. Calculate Acquisition analysis for Tuna Ltd= equity +[ Net value Inventory + Net value patents + Net value Plant ]*(1-tax rate)=(66000 + 6000) + [ 4500 + 3000 + 15000]* (1 – 30%)= 87750Therefore, net fair value of Brim Ltd is $87,750Goodwill = consideration transferred by Tuna – net fair value of Brim=90,000-87,750=$2,250Solution 2. Prepare consolidation journal entries for Tuna Ltd1. Entries- Business combination valuationDrCrAccumulated depreciation30,000Plant27,000Deferred tax liability900Business combination valuation reserve (BCVR)2,100Depreciation expense600Retained earnings (1/7/2016)600Accumulated depreciation1,200Deferred tax liability360Income tax expense180Retained earnings (1/7/2016)180Goodwill2,250BCVR2,2502 Entries - Pre-acquisitionDrCrRetained earnings (1/7/2015)6,000Share capital66,000BCVR18,000Shares in Brim Ltd90,000Retained earnings (1/7/2016)(6000 + 3150 + 10500)19,650Share capital66,000Business combination valuation reserve 4,350
Shares in Brim90,0003. Entries - Sales profit for closing inventoryDrCrSales revenue21,000Cost of sales21,000Sales revenue4,500Cost of sales4,200Inventory300Deferred tax asset90Income tax expense904. Entries - Profit for opening inventory (Brim)DrCrRetained earnings (1/7/2016)420Income tax expense180Cost of sales6005. Entries- Sale of Plant (current)DrCrProceeds from sale plant15,000Carrying amount of plant sold14,000Plant1,000Deferred tax asset300Income tax expense300Accumulated depreciation100Depreciation expense100Income tax expense30Deferred tax asset306. Entries -Sale of Plant (prior period)DrCrRetained earnings (1/7/16)1,400Deferred tax asset600Plant2,000
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