Acquisition Analysis of Sublime Ltd || Assignment

   

Added on  2020-03-02

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Acquisition Analysis as on 1 July, 2015Net fair value of identifiable assets and liabilities of Sublime Ltd.Share capital 30,000 General reserves 15,000 Other reserves 3,000 Retained earnings 10,500 Inventories ((28000-25000)*(1-30%)) 2,100 Equipment ((16000-12000)*(1-30%)) 2,800 Machinery ((8000-7500)*(1-30%)) 350 Land ((12240-9240)*(1-30%)) 2,100 Net fair value 65,850 Net consideration paid 68,600 Goodwill 2,750 Consolidation Worksheet entries1Pre - Acquisition Entry as on 1 July, 2015Share capitalDr 30,000 General reservesDr 15,000 Other reservesDr 3,000 Retained earningsDr 10,500 Business combination valuation reserveDr 7,350 GoodwillDr 2,750 To Shares in Sublime LtdCr (68,600)(To record acquisition analysis)2Business Combination Valuation Entries as on 30 June,20172(a)Accumulated Depreciation - EquipmentDr 3,000 EquipmentDr 1,000 To Deferred tax liabilityCr (1,200)To Business combination valuation reserveCr (2,800)(To record fair valuation of equipment)2(b)Depreciation exp - EquipmentDr 500 Retained earnings (1/7/16)Dr 500 Accumulated Depreciation - EquipmentCr (1,000)(To record depreciation on fair valued amount of equipment)2(c)Deferred tax liabilityDr 300 To Income tax expenseCr (150)To Retained earnings (1/7/16)Cr (150)(To record tax expense on above depreciation)
Acquisition Analysis of Sublime Ltd || Assignment_1
2(d)Depreciation expense - machineryDr 50 Gains/(losses) on sale of non-current assetsDr 350 To Income tax expenseCr (120)Retained earnings (1/7/16)Dr 70 To Transfer from business combination valuation reserveCr (350)(To record sale of machinery)2(e)Retained earnings (1/7/16)Dr 3,000 To Retained earnings (1/7/16)Cr (900)To Transfer from business combination valuation reserveCr (2,100)(Sale of land recorded)2(f)Retained earnings (1/7/16)Dr 3,000 To Retained earnings (1/7/16)Cr (900)To Transfer from business combination valuation reserveCr (2,100)(Sale of inventory recorded)3DividendOther reservesDr 3,000 To Share capitalCr (3,000)(To record issuance of bonus shares)Inter-entity sales of Inventory4Sales revenueDr 6,000 To Cost of SalesCr (6,000)(To record Inter entity sales of inventory)5Sales revenueDr1875To Cost of SalesCr (1,375)To InventoryCr (500)(To record profit elimination on Inter entity sales of inventory)6(a)Retained earnings (1/7/16)Dr 1,050 Deferred tax assetDr 450 To EquipmentCr (1,500)(To record inter-entity sale of equipment)6(b)Accumulated Dep - EquipmentDr 225 To Depreciation - EquipmentCr (150)To Retained earnings (1/7/16)Cr (75)(To record additional depreciation on above sale)6(c)Income tax expenseDr 45
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Retained earnings (1/7/16)Dr 23 To Deferred tax assetCr (68)(To record tax expense on above depreciation)7(a)Gains/(losses) on sale of non-current assetsDr 1,000 To MachineryCr (1,000)(To record elimination on inter entity sale of machinery)7(b)Deferred tax assetDr 300 To Income tax expenseCr (300)(To record elimination of tax expense on above sale)7(c)Accumulated Dep - MachineryDr 50 To Depreciation - MachineryCr (50)(To record elimination of depreciation on above sale)7(d)Income tax expenseDr 15 To Deferred tax assetCr (15)(To record tax expense on above depreciation)8Accumulated impairment lossesDr 1,375 To GoodwillCr (1,375)(To record impairment of goodwill)9Advance from Peace LtdDr 5,000 Advance to Sublime LtdCr (5,000)(To record elimination of inter entity advance)Consolidation WorksheetDebit balances Peace Ltd Sublime Ltd Total Adjustments $ $ Ref. Dr Cr Ref. Total Shares in Sublime Ltd 68,600 - 68,600 68,600 1 - Inventory 85,790 35,160 120,950 500 5 120,450 Other current assets 4,310 1,550 5,860 5,860 Deferred tax assets 8,100 3,700 11,800 6(a) &7(b) 750 83 6(c) &7(d) 12,468 Machinery 14,000 11,000 25,000 1,000 7(a) 24,000
Acquisition Analysis of Sublime Ltd || Assignment_3

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