Company Accounting: Solved Assignments and Essays

This document contains solved assignments and essays on Company Accounting. It includes answers to questions related to tax liability, deferred tax assets, and consolidated financial statements. The document also covers the acquisition of assets and liabilities by Block Limited in Wilson Ltd and the acquisition of all shares in Mason Ltd by Johnson Ltd.

Running head: COMPANY ACCOUTNING
Company Accounting
Name of the Student:
Name of the University:
Authors Note:

1
COMPANY ACCOUTNING
Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................7
Part A:........................................................................................................................................11
Part B:........................................................................................................................................11
Answer 3:.......................................................................................................................................13
Answer 4:.......................................................................................................................................24
References:....................................................................................................................................37

2
COMPANY ACCOUTNING
Answer 1:
Question 1:
Requirement 1:
Current tax worksheet
Current tax liability
Particulars Amount ($) Amount
($)
Before tax profit as per Comprehensive income statement 400,493.
00
Add/ (Less): Items of revenue and expenditures
Depreciation on:
Plant 50,000.00
Motor vehicles 55,000.00
Building 8,000.00
Entertainment expenses is not allowed as deduction 18,000.00
Revaluation profit on land is not subjected to income tax
Government grant is not treated as income for start up (10,000.00)
Office supplies expenses and purchases are same at $15,000

3
COMPANY ACCOUTNING
Depreciation allowed for tax purposes on:
Plant (75,000.00)
Motor vehicles (33,000.00)
Bad debt expenses is allowed as deduction
Interest revenue is taxable hence, no adjustment is necessary
Rent revenue is taxable hence, no adjustment is needed
Employee benefit expenses is allowed as deduction Assuming it has been paid
Net increase / (decrease) in profit 13,000.
00
Taxable profit 413,493.
00
Current tax liability @30% 124,047.
90
Less: Total tax paid (Note I) 116,050.
00
Tax payable 7,997.
90

4
COMPANY ACCOUTNING
Tax payable is $7,997.90 as can be seen from the above calculation (Beresford, 2016).
Note I:
Note I:
Tax instalments paid
Instalment date Instalment amount
($)
28.07.2018 22,500.00
28.10.2018 31,420.00
28.02.2019 30,380.00
28.04.2019 31,750.00
Total tax paid for 2018-2019 116,050.00
Requirement 2:
Deferred tax assets as on June 30, 2019
Particulars Amount ($) Amount ($)
Deferred tax assets as on June 30, 2018 40,500.0
0
Add/ (less): For transactions in 2018-19

5
COMPANY ACCOUTNING
Accounting profit 400,493.00
Taxable profit 413,493.00
Deferred tax liability for 2018-19 3,900.0
0
44,400.0
0
Deferred tax liabilities as on June 30, 2019
Particulars Amount ($) Amount ($)
Deferred tax liabilities as on June 30, 2018 38,100.0
0
Add/ (less): For transactions in 2018-19
Tax effects on Revaluation profit on land 30,000.0
0
Deferred tax liability for 2018-19 68,100.0
0
Deferred tax liability is $68,100 (Parker, 2018).
Requirement 3:
Date Particulars Debit ($) Credit ($)

6
COMPANY ACCOUTNING
30-Jun-
19
Profit and loss account 124,047.90
Provisions for income tax 124,047.90
(Being provision for income tax made)
30-Jun-
19
Revaluation profit on land 30,000.00
Deferred tax liabilities 30,000.00
(Being deferred tax liabilities for revaluation profit on land is
recognized)
30-Jun-
19
Deferred tax assets 3,900.00
Provision for income tax 3,900.00
(Being deferred tax assets recognized for difference between
accounting and taxation profit)

7
COMPANY ACCOUTNING
Answer 2:
Value of assets and liabilities acquired by Block Limited in Wilson Ltd
Particulars Amount ($) Amount ($)
Trade receivables 30,000.0
0
Inventory 45,800.0
0
Land 500,000.0
0
Building 725,000.0
0
Plant and machinery 106,000.0
0
1,406,800.00
Less: Provision for environmental restoration 175,000.0
0
Net asset acquired 1,231,800.00
Number of shares issued in Block Limited (120000 x 5) 600,000.0

8
COMPANY ACCOUTNING
0
Value of each share 2.
45
Purchase consideration 1,470,000.00
Internal set off
Number of shares held in Wilson Limited 5,000.0
0
Value of investment 528,500.0
0
Purchase consideration in respect of above (5000 x 5) x 2.45 61,250.0
0
Goodwill:
Purchase consideration 1,470,000.00
Less: net asset acquired 1,231,800.00
Goodwill arising on acquisition 238,200.0
0
Add: Goodwill arising on Investment set off (528500 - 61250) 467,250.0

9
COMPANY ACCOUTNING
0
Total goodwill arising on acquisition 705,450.0
0
Additional payment on the date of acquisition
Issue of additional shares 1,700.0
0
Legal and accounting fees 2,300.0
0
Accrued employee benefits 13,000.0
0
Accrued loan interest 11,250.0
0
Other accrued expenses 762.0
0
Solicitor fees 2,690.0
0
31,702.0
0
Net goodwill arising on acquisition 737,152.0

10
COMPANY ACCOUTNING
0
Net goodwill is $737,152 (Schaefer, 2017).
Part A:
Part B:
Australian Accounting Standards Board (AASB) has issued AASB 10 to state the requirements
for the parent organizations to prepare consolidated financial statements in accordance with the
standard procedures. AASB 10 makes it clear that an entity controlling another entity by
acquiring majority of its shares or by any other means such as controlling the board of the
company must prepare and present consolidated financial statements in accordance with the
guidelines of this standard (Beresford, 2016)..
An entity controlling 51% or more of the share capital of another entity will be considered the
controlling entity or parent company of the latter and is responsible to prepare consolidated
financial statements to report the financial performance and position of the parent and subsidiary
in consolidation (Wilson & Key, 2017).
The assets and liabilities of the parent and subsidiaries must be accumulated as per the due
process along with the amount of revenue and expenditures to prepare and present the
consolidated financial statements of the parent (Wilson & Key, 2018).
Journal entries
Particulars Debit ($) Credit ($)

11
COMPANY ACCOUTNING
Sundry assets:
Trade receivables 30,000.00
Inventory 45,800.00
Land 500,000.00
Building 725,000.00
Plant and machinery 106,000.00
Goodwill (Arising on acquisition) 238,200.00
Provision for environment restoration 175,000.00
Purchase consideration 1,470,000.00
(Being assets and liabilities of Wilson Ltd taken over)
Issue of additional shares 1,700.00
Legal and accounting fees 2,300.00
Accrued employee benefits 13,000.00
Accrued loan interest 11,250.00
Other accrued expenses 762.00
Solicitor fees 2,690.00
Cash 31,702.00

12
COMPANY ACCOUTNING
(Being associated expenses to take over incurred and paid)
Goodwill 31,702.00
Issue of additional shares 1,700.00
Legal and accounting fees 2,300.00
Accrued employee benefits 13,000.00
Accrued loan interest 11,250.00
Other accrued expenses 762.00
Solicitor fees 2,690.00
(Being the expenses written off against goodwill)
Purchase consideration 1,470,000.00
Goodwill 467,250.00
Share capital (115000 x 5) x 2.45 1408750
Investment 528,500.00
(Being purchase consideration discharged and goodwill recorded against the investment
written off)

13
COMPANY ACCOUTNING
Answer 3:
Requirement 1
Acquired all shares in Mason Ltd by
Johnson Ltd
3,200,000.
00
Net share as on July 01, 2016
Share capital 1,750,000.
00
General reserve 700,000.
00
Retained earnings 900,000.
00
Add: Upward revaluation of assets:
Inventory 50,000.
00
Land 200,000.
00
3,600,000.
00

14
COMPANY ACCOUTNING
Less:
Downward revaluation of assets 130,000.
00
Contingent liability recognized 75,000.
00
205,000.
00
Net asset acquired 3,395,000.
00
Cost of acquisition 3,200,000.
00
Thus, gain on purchase 195,000.
00
Requirement 2:
Requirement 2
Dat
e
Particulars Debit ($) Credit ($)

15
COMPANY ACCOUTNING
Net assets 3,395,000.00
Purchase consideration 3,200,000.
00
Capital reserve 195,000.
00
(Being Mason Ltd acquired and capital reserve recorded)
Purchase consideration 3,200,000.00
Share capital 3,200,000.
00
(Being share issued to discharge purchase consideration)
Requirement 3:
Requirement 3
Dat
e
Particulars Debit ($) Credit ($)
Profit and loss account 36,25
0.00
Machinery 36,25

16
COMPANY ACCOUTNING
0.00
(Being the unrealized profit on machinery sale reversed)
Accumulated depreciation 5,00
0.00
Depreciation 5,00
0.00
(Being excess depreciation reversed back)
Requirement 4:
Requirement 4:
Dat
e
Particulars Debit ($) Credit ($)
Profit and loss account 1,360.00
Inventory 1,36
0.00
(Being unrealized profit written off on stock)
Plant (12000 -8000) 4,000.00

17
COMPANY ACCOUTNING
Profit and loss account 4,00
0.00
(Being the loss on intra sale reversed)
Depreciation (2000 x 6/12) - 667 333.00
Accumulated depreciation 33
3.00
(Being under depreciation reversed)
Requirement 5:
Requirement 5
Date Particulars Debit ($) Credit ($)
Profit and loss account 30,000.0
0
Inventory 30,000.0
0
(Being unrealized profit written off on stock)
Inventory 1,360.0

18
COMPANY ACCOUTNING
0
Profit and loss account 1,360.0
0
(Being unrealized profit earlier written off now recorded as
inventory sold)
Profit and loss account 8,800.0
0
Inventory 8,800.0
0
(Being unrealized profit written off on stock)
Outstanding management fees 115,000.0
0
Management fees receivable 115,000.0
0
(Being intra organization liabilities set off)
Requirement 6:
Johnson Mason Consolidated Entries Group

19
COMPANY ACCOUTNING
Ltd Ltd
Re
f
Dr Cr Ref
Assets
Cash $925,000 $87,000 $1,012,00
0
Trade and
other
receivables
$535,500 $219,000 $754,500
Impairment
trade
receivables
-$10,500 -$6,500 $0 -$17,000
Inventory $2,100,00
0
$985,000 $3,085,00
0
Land $5,340,00
0
$1,400,00
0
$6,740,00
0
Plant $11,466,0
00
$4,079,00
0
$11,466,00
0
$0
Accumulat - - - $0

20
COMPANY ACCOUTNING
ed
depreciatio
n - plant
$3,276,00
0
$1,944,00
0
$3,276,000
Equipment $615,000 $207,000 $0 $822,000
Accumulat
ed
depreciatio
n -
equipment
-$165,000 -$42,000 $0 -$207,000
Loan to
Mason Ltd
$200,000 $0 $0 $200,000 $400,000
Investment
in Mason
Ltd
3120000 3120000 0
Deferred
tax assets
$350,000 $175,000 $525,000
Other
assets
$0 $0 $0
Total
Assets
$21,200,0
00
$5,159,50
0

21
COMPANY ACCOUTNING
$0 $11,510,00
0
-
$11,510,0
00
Liabilities
and equity
Share
capital
$14,000,0
00
$3,200,000 $17,200,0
00
Retained
earnings
45850000 1602500 76,410.
00
5,360.0
0
47381450
Asset
revaluation
surplus
$35,000 $10,500 $0 45500
General
reserve
$900,000 900000
Trade and
other
payables
$350,000 $297,500 647500
Deferred
tax
$130,000 $24,500 154500

22
COMPANY ACCOUTNING
liabilities
Loans $2,100,00
0
$375,000 $2,100,000 4575000
Loans from
Johnson
Ltd
$200,000 $200,00
0
$0
Capital
reserve
$195,000 $195,000
Total
Assets
$62,465,0
00
$3,410,00
0
$276,41
0
$5,500,360 -
$5,223,95
0
Answer 4:
Requirement 1:
Particulars Amount ($) Amount
($)
Net asset of Trinity Ltd as on January 01, 2016

23
COMPANY ACCOUTNING
Share capital
300,000.00
General reserve
50,000.00
Retained earnings
90,000.00
Total asset 440,000.
00
Add: Revaluation gain
Inventory (50000 - 45000)
5,000.00
Plant (220000 -200000)
20,000.00
25,000.
00
Net asset value 465,000.
00
Share of Anderson Ltd. (465000 x 85%)
395,250.00

24
COMPANY ACCOUTNING
Cost of acquisition
430,000.00
Amount of goodwill arising on acquisition as on the date
acquisition (430000- 395250) 34,750.00
Requirement 2:
Particulars Amount ($) Amount
($)
Fair value of consideration 430,00
0.00
Non-controlling interests as proportion of
identifiable assets
75,00
0.00
Interest held previously
-
505,000.
00
Less: Identifiable net assets 465,000.
00
Goodwill 40,000.

25
COMPANY ACCOUTNING
00
Requirement 3:
Date Particulars Debit ($) Credit ($)
31-12-16 Net asset acquired (430000 -
40000)
390,000.0
0
Goodwill 40,000.0
0
Purchase consideration 430,000.0
0
(Being goodwill recorded on acquisition of Trinity Ltd.)
31-12-16 Purchase consideration 430,000.0
0
Share capital 430,000.0
0
(Being purchase consideration discharged)
31-12-16 Share of profit (34000 x 85%) 28900

26
COMPANY ACCOUTNING
Business Combination valuation reserve
(BCVR)
28900
(Being the share of profit for 2016 recorded)
Requirement 4:
Date Particulars Debit ($) Credit ($)
31-12-17 Share of profit (30000 x 85%) 25500
BCVR 25500
(Being the share of profit for 2017 recorded)
31-12-17 BCVR 4500
Inventory 4500
(Being unrealized profit written off against
stock)
31-12-18 BCVR 28050
Profit and loss account 28050
(Being the share of profit for 2018 recorded)

27
COMPANY ACCOUTNING
Inventory 4500
BCVR 4500
(Being the unrealized profit has been realized now)
BCVR 240
Inventory 240
(Being unrealized profit written off against
stock)
BCVR 3000
Equipment 3000
(Being intra-profit included in equipment written off)
Accumulated depreciation-
equipment
420
Deferred tax assets (600 x 30%) 180
Depreciation 600
(Being excess depreciation written off)

28
COMPANY ACCOUTNING
Land 40000
BCVR 40000
(Being land revalued)
Requirement 5:
Anderson Ltd Trinit
y Ltd
Consolidated Entries Grou
p
R
ef
Dr Cr Ref
Assets
Cash $10,000 $7,000 $17,00
0
Trade and other
receivables
$40,000 $48,00
0
$88,00
0
Inventory $95,000 $80,00
0
$0 $240 $174,7
60
Land $300,000 $221,0
00
$40,0
00
$561,0
00

29
COMPANY ACCOUTNING
Plant $600,000 $500,0
00
$1,100
,000
Accumulated
depreciation - plant
-$306,000 -
$300,0
00
-
$606,0
00
Equipment $240,000 $100,0
00
$3,000 $337,0
00
Equipment $615,000 $207,0
00
$0 $822,0
00
Accumulated
depreciation -
equipment
-$192,000 -
$25,00
0
$420 -
$216,5
80
Investment in Trinity $430,000 $0 $0 $430,0
00
$0
Deferred tax assets 10000 15000 180 $25,18
0
Goodwill $40,0
00
$40,00
0
Total Assets $1,842,000 $853,0

30
COMPANY ACCOUTNING
00
$80,6
00
$433,2
40
-
$352,6
40
Liabilities and
equity
Share capital $800,000 $430,0
00
$1,230
,000
Retained earnings 222000 16300
0 -
38500
0
Asset revaluation
surplus
$64,000 $28,00
0
$0 92000
General reserve $80,00
0
80000
Trade and other
payables
$21,000 $8,000 29000
Deferred tax
liabilities
$12,00
0
12000
Loans $120,000 $55,00 $120,0 29500

31
COMPANY ACCOUTNING
0 00 0
Total Assets $62,465,000 $3,410
,000
$0 $550,0
00
-
$550,0
00
Requirement 6:
Consolidated statement of profit and loss
Particulars Amount ($) Amount
($)
Sales revenue 100,000.00
Less: Cost of sales 28,000.00
Gross profit 72,000.00
Other expenses (18,000.00)
Other revenue 39,500.00
Operating profit 93,500.0

32
COMPANY ACCOUTNING
0
Less: income tax expenses 20,500.0
0
Profit after tax 73,000.0
0
Consolidated statement of financial position:
Assets
Cash $17,000
Trade and other receivables $88,000
Inventory $174,760
Land $561,000
Plant $1,100,000
Accumulated depreciation - plant -$606,000
Equipment $337,000

33
COMPANY ACCOUTNING
Equipment $822,000
Accumulated depreciation - equipment -$216,580
Investment in Trinity $0
Deferred tax assets $25,180
Goodwill 40000
Total Assets $2,342,360
Liabilities and equity
Share capital $1,230,000
Retained earnings $385,000
Asset revaluation surplus 92000
General reserve $80,000
Trade and other payables $29,000
Deferred tax liabilities $12,000
Loans $295,000
Capital reserve $219,360

34
COMPANY ACCOUTNING
Total liabilities and equity $2,342,360
Consolidated statement of changes in equity
Particulars Amount ($)
Share capital 800,000.00
Add:
Issue of additional shares 430,000.00
1,230,000.00
Add: retained 385,000.00
1,615,000.00
Less: Dividend declared 48,000.00
1,567,000.00
References:
Atanasov, A. (2017). ///// (The Category 'Business' in the Context of Accounting for Business
Combinations Under IAS/IFRS). SSRN Electronic Journal, 2(2), 12-233. doi:
10.2139/ssrn.2784114

35
COMPANY ACCOUTNING
Beresford, D. (2016). Congress Looks at Accounting for Business Combinations. Accounting
Horizons, 16(2), 73-86. doi: 10.2308/acch.2001.15.1.73
Parker, W. (2018). Business Combinations and Accounting Valuation. Journal Of Accounting
Research, 4(3), 149. doi: 10.2307/2489950
Schaefer, T. (2017). Microcomputer sensitivity analyses for business combinations. Journal Of
Accounting Education, 6(3), 297-306. doi: 10.1016/0748-5751(87)90025-x
Wilson, A., & Key, K. (2018). Revised Accounting For Business Combinations. American
Journal Of Business Education (AJBE), 3(4), 13. doi: 10.19030/ajbe.v1i2.4620
Wilson, A., & Key, K. (2018). Revised Accounting For Business Combinations. American
Journal Of Business Education (AJBE), 2(3), 13. doi: 10.19030/ajbe.v1i2.4620