Consolidated Worksheet and Financial Statements for Jonathan Ltd. and Thomas Ltd.

This report presents the acquisition analysis and preparation of consolidated financial statements for Jonathan Ltd. and Thomas Ltd. The report includes a consolidated worksheet, financial statements, and entries on 30 June 2020. The assets and liabilities are identified and adjustments are made for the acquisition process.

CONSOLIDATED
WORKSHEET AND
FINANCIAL
STATEMENTS

Contents
INTRODUCTION...........................................................................................................................3
TASK A...........................................................................................................................................3
Calculation of Acquisition Analysis............................................................................................3
TASK B...........................................................................................................................................5
Worksheet Entries on 30 June 2020............................................................................................5
TASK C...........................................................................................................................................6
Consolidated Worksheet as on 30th June 2020............................................................................6
TASK D...........................................................................................................................................7
Consolidated Financial Statements..............................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The consolidated financial statements are defined as the aggregated statements of an entity with
multiple divisions or companies, aiming towards fulfilment of a unified objective or goal. Many
a times, the business entities use the term “consolidated” for defining the aggregate reporting,
including every official aspect of the company. According to the Generally Accepted Accounting
Principles, the private companies have to abide by few requirements, as compared to the public
companies. Also, if any kind of company chooses to report internationally, it must comply with
the International Financial Reporting standards (Maliki, 2018). The following report will present
Jonathan Ltd. who has acquired Thomas Ltd., by following acquisition method and calculation of
acquisition analysis in preparation of consolidated financial statements, through this method the
company will be able to recognize the assets and liabilities at fair value. Furthermore, the
determination of whether the entity has acquired goodwill or gain purchase has occurred, is also
performed and is defined as the end result of the acquisition analysis. By analysing and
examining the consolidated financial statements of the company, the users, whether internal or
external will be able to identify the position and status of the newly formed entity.
TASK A
Calculation of Acquisition Analysis
During the acquisition process the company tends to follow certain specifically drafted steps to
calculate the amount of goodwill or the amount which is generated by acquisition of one
company by the another. Here the amount will be determined by ascertaining the total assets and
total liabilities existing at the time of acquisition, along with the preparation of consolidated
financial statements and journal entries. The analysis is crucial for every type of company,
irrespective of its size, nature of business and profit orientation, while also providing significant
information to the outsiders about how much the companies involved, are advantaged by the
acquisition decision (Bodnar, 2019). The assets and liabilities identifiable of Thomas Ltd., are as
follows:
Particulars Carrying amount Fair value
Plant (cost $230000) (Sold on
1st January 2022 for $155000)
$ 200000 $ 210000
Land (Sold on 1st Feb at
$150000)
$ 100000 $ 120000

Inventories (Sold by 30th June
2020)
$ 30000 $ 38000
Also, Thomas Ltd. has recorded following additional details:
Dividend Payable $7000
Goodwill (excluding
impairment losses of $13000)
$5000
Intangible Assets or Internally
generated brands (Fair Value)
$12000
Contingent Liability (Fair
Value)
$15000
Damages of Court Case $16000
Share Capital $130000
General Reserve (T/F $20000
to Retained Earnings on 1 July
2020 and $15000 on Feb.
2022)
$50000
Retained Earnings $40500
Calculation of Acquisition Analysis
The Net Fair Value = (130000 + 50000 + 40500) (Equity)
+ (210000 – 200000) X 0.70 (Plant)
+ (120000 – 100000) X 0.70 (Land)
+ (38000 – 30000) X 0.70 (Inventory)
- (15000 X 0.70) (Contingent Liability)
+ (12000 X 0.70) (Intangible assets)
- 5000 (Goodwill recorded)
= $240000
Consideration Transferred = $246000
Goodwill = 246000 - 240000 = $6000
Unrecorded Goodwill = 6000-5000
= $1000

TASK B
Worksheet Entries on 30 June 2020
The business combination valuation entries on 30 June 2020, are affected by the assets and
liabilities for which the acquisition analysis will be considered. The inventories were sold by 30
June 2020, that is prior to the current period, henceforth no business combination valuation entry
has to done. The inventory value which has been increased will be used in the retained earnings
of the subsidiary, due to the fact that the subsidiary realised this increment through the sale.
(Yılmaz, 2020)
Accumulated Depreciation (Plant)
Plant account
Deferred Tax Liability
Business Combination Valuation
Reserve
Dr
Cr
Cr
Cr
$30000
$20000
$3000
$7000
Retained Earnings
Share Capital
General Reserve
Business Combination Valuation
Reserve
Shares of Thomas Ltd.
Dr
Dr
Dr
Dr
Dr
$40500
$130000
$50000
$25500
$246000
Dividend Payable
Dividend Receivable
Dr
Cr
$7000
$7000
General Reserve
Retained Earnings
Dr
Cr.
$20000
$20000
The business combination valuation entries on 30 June 2020, are affected by the assets and
liabilities for which the acquisition analysis will be considered. The inventories were sold by 30
June 2020, that is prior to the current period, henceforth no business combination valuation entry
has to done. The inventory value which has been increased will be used in the retained earnings
of the subsidiary, due to the fact that the subsidiary realised this increment through the sale.
(Yılmaz, 2020)

Furthermore, the pre-acquisition entries will also be recorded, so as to give effect to all of the
changes and transactions made before the acquisition process. Following is the adjustment
provided for the beginning of the period ended 30 June:
Retained Earnings (40500 + 5600)
Share Capital
General Reserve
Business Combination Valuation Reserve
(25500-5600)
Shares of Thomas Ltd.
Dr
Dr
Dr
Dr
Cr
46100
130000
50000
19900
246000
TASK C
Consolidated Worksheet as on 30th June 2020
Particulars Jonathan Ltd. Thomas Ltd Adjustments Group
Dr Cr
Revenue 90000 64000 - - 154000
Expenses 34000 42000 - - (76000)
Trading Profit 56000 22000 - - 78000
Gains 8000 8000 - - 16000
Profit before tax 64000 30000 - - 94000
Income Tax Expense 12000 5000 - - (17000)
Profit for the period 52000 25000 77000
Retained Earnings (1 June
2021)
103000 55000 - - 158000
Transfer from General
Reserve
30000 15000 - 15000 60000
Retained Earnings (30 June
2022)
165000 95000 - - 218000
Share Capital 150000 130000 246000 - 526000
General Reserve 10000 20000 15000 - 15000
Other Components of Equity 25000 18000 - - 43000
Total Equity 350000 263000 - - 584000

Deferred Tax Liability 18000 10000 - - 28000
Payables 40000 10000 - - 50000
Other Liabilities 250000 230000 - - 480000
Total Liabilities 308000 250000 - - 558000
Total Equity and Liabilities 658000 513000 - - 1437000
Plants 430000 320000 - - 750000
Depreciation (182000) (220000) - - (402000)
Land 150000 20000 - - 170000
Shares in Thomas Ltd. 246000 - - - 246000
Financial Assets 110000 107000 - - 217000
Inventory 40000 30000 - - 70000
Cash 10000 5000 - - 15000
Impairment Losses - (13000) - (13000) (13000)
Goodwill 20000 18000 1000 - 39000
Total Assets 658000 513000 - - 1092000
TASK D
Consolidated Financial Statements
As previously discussed, the consolidated financial statements are documents prepared for the
management of transactions which belong to both the companies involved in acquisition, also the
statements are supposed to include the adjustments made for during the whole process and
henceforth require separate columns to define the same (National Collegiate Athletic
Association, 2019).
THOMAS LTD
Consolidated Statements of Profit and Loss and Other Comprehensive Income
For the year ended 30 June 2020
Profit for the Period
Other Comprehensive Income
Total Comprehensive Income
$77000
-
$77000

Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Particulars Amount in $
Comprehensive Income 77000
Retained Earning 218000
Share Capital 526000
General Reserve 30000
Other Components of Equity 43000
Consolidated Balance Sheet
For the year ended 30 June 2022
Particulars Amount in $
EQUITY AND LIABILITIES:
Equity:
Share Capital
Reserve and Surplus
Other components of equity
Retained Earnings
Total equity
Non-current Liabilities:
Other
526000
15000
43000
218000
802000
480000
TOTAL 1282000
ASSETS
Non-current assets:
Plant
Accumulated Depreciation
Land
Financial Assets
Inventory
Cash
750000
(402000)
170000
217000
70000
2000

Goodwill
Shares in Thomas Ltd.
39000
246000
TOTAL 1282000
CONCLUSION
The following report lays down the assessment and treatment of the assets and liabilities, which
are identified at the time of acquisition (Brusca, 2018). Through proper procedures and methods,
the companies will be able to examine the position of its business items while keeping track of
all the additional adjustments made towards such acquisition procedure. Furthermore, the
consolidated worksheet and relevant statements are also prepared to understand the whole
procedure in a better and systematic way. Generally, the transactions are defined as the pre and
post-acquisition truncations, which helps divide the adjustments and create effective changes.

REFERENCES
Books and Journals
Bodnar, A., Andreeva, A., Medvedev, M. and Medvedev, N., 2019, July. Information
architecture of the data analysis and management using fuzzy logic tools. In AIP
Conference Proceedings (Vol. 2116, No. 1, p. 430020). AIP Publishing LLC.
Brusca, I., Grossi, G. and Manes-Rossi, F., 2018. Setting consolidated reporting standards for
local government. Public Money & Management, 38(7), pp.483-492.
Maliki, A.L.M.K.A., 2018. The application of local accounting rule NO.(6) in the consolidated
accounting system has been applied. Managerial Studies Journal, 10(21).
National Collegiate Athletic Association, 2019. Consolidated financial statements: August 31,
2019 and 2018.
Yılmaz, M.K., Aksoy, M. and Çelik, T.T., 2020. Market reaction to regulatory policy changes in
financial statements filings: evidence from Turkey. Eurasian Economic Review, 10(4),
pp.567-605.