Company Accounting Assessment Item Solution - 2019

This document presents a comprehensive solution to a company accounting assignment. The assignment covers several key areas, including the calculation of accounting profit before tax, adjustments for various revenue and expense items, and the preparation of a statement of financial position. It includes detailed answers to questions regarding taxation, business combinations, and the application of accounting standards like AASB 3. The solution provides journal entries, explanations, and analysis of financial data, offering a thorough understanding of the topics covered. The document also delves into the concept of business combinations, differentiating between horizontal and vertical combinations and explaining their objectives and implications. Overall, the assignment solution offers a complete guide for students studying company accounting.

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
Part A:....................................................................................................................................4
Part B:.....................................................................................................................................6
Answer to question 3:.................................................................................................................8
Answer to question 4:...............................................................................................................17
Bibliography:............................................................................................................................20

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Answer to question 1:

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Answer to question 2:
Part A:

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Part B:
Business Combination:
Every business organisations seeks to grow and expand their business operations.
There are various ways of such growth and expansion. On is organic rout of business
development and the other is the indirect rout. In the organic rout of growing business, the
company expands their business through investments in fixed assets and funds those
investments are made from their own source of capital. On the other hand, the indirect way of
growing business operation is to acquire existing business units, which are already in
operation in the market (Hadi 2015).
Business combination means acquiring the controlling power of an existing
business unit to gain access to the assets of the target organisation. Generally, the
business combination term is used for acquisition of companies. In case of companies the
controlling power of the business organisation is determined by the voting power. In most of
the cases, one ordinary share contains a single voting power (Kieso Weygandt & Warfield
2016). Hence, to control the decision making of a company and to gain access over the
financial and non financial assets of the company, more than 50 percent of the voting power
needs to be acquired. Therefore, as per AASB 3’s concept of business combination it can be
defined as the situation when one company acquires more than 50 percent of the controlling
power of the company by acquiring ordinary shares. In subsequent such acquisition the
holding company can consolidated the assets and liabilities in their financial statement (Hadi
2015).
Mainly the business combination can be classified into two types, one is horizontal
combination and the other is vertical combinations. Horizontal combination means acquitting
the companies operating in the same industry and producing and selling identical goods in the

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market. The main objective of the horizontal combination is to reduce the competition in the
market and to expand the business operation in the same domain of the business. It means
acquiring same types of business organisation. On the other hand, the vertical combination
means, acquisition of companies which are either supplier of the said business organisation or
they are working at any other stage of the supply chain (Kieso Weygandt & Warfield 2016).
In other words, the vertical combination includes the acquisition of such companies, which
are interdependent in nature. It ensures the availability of inputs and smoother delivery of
goods and services to the customers (Hadi 2015).
From the above discussion it can be concluded that, the business combination is a
corporate strategy of acquiring existing business units to grow the volume of business and to
be the market leader reducing completion in the market. Lastly, alls the transactions related to
such activities must be properly treated in the books of accounts in compliance with the
AASB 3 and any other applicable regulations.

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Answer to question 3:

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