Balance Sheet Analysis - Example Company

The assignment presents a balance sheet for an unspecified company as of June 30, 2017. It breaks down the company's financial position into current and non-current assets, along with current and non-current liabilities. The balance sheet also details the company's equity structure, including share capital, general reserve, and retained earnings. Users are expected to analyze this information to understand the company's financial health and position.

(i)
Acquisition Analysis as on 1st July-2015
Particulars Amount ($)
Share capital 30,000
General reserves 15,000
Other reserves 3,000
Retained earnings 10,500
Inventories [(28000-25000) x (1-30%)] 2,100
Equipment [(16000-12000) x (1-30%)] 2,800
Machinery [(8000-7500) x (1-30%)] 350
Land [(12240-9240) x (1-30%)] 2,100
Net fair value of identifiable assets and liabilities of Sublime
Ltd. 65,850
Net consideration paid = 68,600
Goodwill = Net consideration paid - Net fair value
= 68,600 - 65,850
= 2,750
Consolidation Worksheet entries
S.
No. Particulars
Dr./
Cr.
Amount
(Dr.)
Amount
(Cr.)
Pre - Acquisition Entry as on 1st July-2015
1 Share capital Dr 30,000
General reserves Dr 15,000
Other reserves Dr 3,000
Retained earnings Dr 10,500
BCVR Dr 7,350
Goodwill Dr 2,750

To Shares in Sublime Ltd 68,600
(Acquisition of Sublime Ltd.)
Business Combination Valuation Entries as on
30th June-2017
2 Accumulated Depreciation - Equipment Dr 3,000
Equipment Dr 1,000
To Deferred tax liability 1,200
To BCVR 2,800
(Equipment valued at fair value)
3 Depreciation exp - Equipment Dr 500
Retained earnings (1st Jul-16) Dr 500
Accumulated Depreciation - Equipment 1,000
(Depreciation valued as per fair value of
equipment)
4 Deferred tax liability Dr 300
To Income tax expense 150
To Retained earnings (1st Jul-16) 150
(Tax expense on depreciation)
5 Depreciation expense - machinery Dr 50
Gains/(losses) on sale of non-current assets Dr 350
Retained earnings (1st Jul-16) Dr 70
To Income tax expense 120
To Transfer from BCVR 350
(Sale of machinery)
6 Retained earnings (1st Jul-16) Dr 3,000
To Retained earnings (1st Jul-16) 900
To Transfer from BCVR 2,100
(Sale of land)
7 Retained earnings (1st Jul-16) Dr

3,000
To Retained earnings (1st Jul-16) Cr 900
To Transfer from BCVR Cr 2,100
(Sale of inventory)
Inter-entity sales of Inventory
8 Sales revenue Dr 6,000
To Cost of Sales 6,000
(Inter entity sales of inventory)
9 Sales revenue Dr 1875
To Cost of Sales 1,375
To Inventory 500
(Profit eliminated on Inter entity sales of
inventory)
Other entries
10 Other reserves Dr 3,000
To Share capital 3,000
(Issuance of bonus shares)
11 Retained earnings (1st Jul-16) Dr 1,050
Deferred tax asset Dr 450
To Equipment 1,500
(Inter-entity sale of equipment)
12 Accumulated Dep - Equipment Dr 225
To Depreciation - Equipment 150
To Retained earnings (1st Jul-16) 75
(Additional depreciation recorded on inter entity
sale)
13 Income tax expense Dr 45
Retained earnings (1st Jul-16) Dr 23
To Deferred tax asset 68

(Tax expense on depreciation)
14 Gains/(losses) on sale of non-current assets Dr 1,000
To Machinery 1,000
(Elimination of effect of inter entity sale of
machinery)
15 Deferred tax asset Dr 300
To Income tax expense 300
(Elimination of tax expense)
16 Accumulated Dep - Machinery Dr 50
To Depreciation - Machinery 50
(Elimination of depreciation on inter entity sale
of machinery)
17 Income tax expense Dr 15
To Deferred tax asset 15
(Tax expense on depreciation)
18 Accumulated impairment losses Dr 1,375
To Goodwill 1,375
(Impairment of goodwill recorded)
19 Advance from Peace Ltd Dr 5,000
Advance to Sublime Ltd 5,000
(Inter entity advance eliminated)

(ii)
Consolidation Worksheet
Debit balances Peace
Ltd
Sublime
Ltd Total Adjustment Total
$ $ Dr Cr
Shares in Sublime Ltd 68,6
00 -
68,60
0
68,60
0 -
Inventory 85,7
90
35,
160
120,95
0
50
0
120,45
0
Other current assets 4,3
10
1,
550
5,86
0
5,86
0
Deferred tax assets 8,1
00
3,
700
11,80
0
75
0
8
3
12,46
8
Machinery 14,0
00
11,
000
25,00
0
1,00
0
24,00
0
Land -
12,
240
12,24
0
12,24
0
Equipment 17,0
00
18,
650
35,65
0
1,00
0
1,50
0
35,15
0
Goodwill - 2,75
0
1,37
5
1,37
5
Cost of sales 32,5
00
26,
750
59,25
0
7,37
5
51,87
5
Other expenses 11,0
00
13,
500
24,50
0
24,50
0
Accumulated impairment
losses
1,37
5
1,37
5
Depreciation exp -
Equipment
50
0
15
0
35
0
Depreciation expense -
machinery
5
0
5
0 -
Income tax expense 3,6
00
1,
000
4,60
0
6
0
57
0
4,09
0
Interim dividend paid 2,0
00
1,
000
3,00
0
3,00
0
Final dividend declared 5,0
00
1,
500
6,50
0
6,50
0
Advance to Sublime Ltd 5,0
00 -
5,00
0
5,00
0 -
256,9
00
126,
050
382,95
0
6,48
5
86,20
3
303,23
3
Credit balances
Share capital 85,0
00
33,
000
118,00
0
33,00
0
85,00
0
General reserve 20,5
00
15,
000
35,50
0
15,00
0
20,50
0
Retained earnings
(1/7/16)
8,0
00
17,
750
25,75
0
18,14
3
2,02
5
9,63
3
Business combination
valuation reserve - 7,35
0
7,35
0 -
Debentures 60,0
00 -
60,00
0
60,00
0

Final dividend payable 5,0
00
1,
500
6,50
0
6,50
0
Deferred tax liability 30
0
1,20
0
90
0
Current tax liabilities 4,0
00
1,
250
5,25
0
5,25
0
Other payables 17,4
00
5,
050
22,45
0
22,45
0
Advance from Peace Ltd -
5,
000
5,00
0
5,00
0 -
Sales 42,5
00
32,
500
75,00
0
7,87
5
67,12
5
Other revenue 9,5
00
10,
500
20,00
0
20,00
0
Gains/(losses) on sale of
non-current assets
2,0
00 500
2,50
0
1,35
0
1,15
0
Accumulated
depreciation – machinery
2,0
00
1,
000
3,00
0
5
0
2,95
0
Accumulated
depreciation – equipment
1,0
00
3,
000
4,00
0
3,22
5
1,00
0
1,77
5
256,9
00
126,
050
382,95
0
91,29
3
11,57
5
303,23
3

(iii)(a)
Peace Ltd.
Consolidated Statement of Profit or loss and other comprehensive income
For the period ended on 30 June, 2017
Particulars Amount
Sales revenue 67,125
Other income 20,000
Total Income 87,125
Cost of Sales 51,875
Other expenses 24,500
Depreciation & amortisation
Accumulated impairment losses 1,375
Depreciation exp - Equipment 350
Depreciation expense - machinery - 1,725
Total expenses 78,100
Profit from operations 9,025
Gain on sale of non-current
assets 1,150
Profit before tax 10,175
Income tax expense 4,090
Profit for the period 6,085
Profit for the period 6,085
(iii)(b)
Peace Ltd.
Consolidated Statement of Changes in Equity
For the year ended on 30 June, 2017
Particulars Share
Capital
Retaine
d
Earning
s
Genera
l
Reserv
e
Balance as at 1 July, 2016 85,000 9,633 20,500
Profit for the year 6,085
Transactions with owners in their capacity as
owners:
- dividends provided for (9,500)
Balance as at June 30, 2017 85,000 6,218 20,500

(iii)(c)
Peace Ltd.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended on 30 June, 2017
(Amount in $)
Particulars As at
30 June, 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories 120,450
Other current assets 5,860
Total current assets 126,310
Non-current assets
Property, plant and equipment
- Machinery 24,000
- Accumulated depreciation - Machinery (2,950) 21,050
- Equipment 35,150
- Accumulated depreciation -
Equipment (1,775) 33,375
- Land 12,240 12,240
Intangible assets - Goodwill 1,375
Deferred tax assets 12,468
Total non-current assets 80,508
Total assets - (a) 206,818
Current liabilities
Trade and other payables 22,450
Current tax liabilities 5,250
Dividend payable 6,500
Total current liabilities 34,200
Non-current liabilities
Financial liabilities - Debentures 60,000
Deferred tax liability 900
Total non-current liabilities 60,900
Total liabilities - (b) 95,100
Net assets (a-b) 111,718
Equity
Share capital 85,000
General reserve 20,500
Retained earnings 6,218 111,718
Total equity 111,718