Consolidation and Acquisition Entries, Equity Changes, and Foreign Exchange Transactions

This article discusses the various accounting entries involved in consolidation and acquisition, changes in equity, and foreign exchange transactions. It provides examples of transactions and their corresponding journal entries. The article is relevant for accounting students and professionals.

Answer 1
Acquisition analysis
Share capital $ 80,000
Retained earnings $ 29,600
General reserve $ 2,400
Consumer list $ 12,600
Plant $ 2,800
Inventory $ 2,100
Land $ 3,500
Net fair value of net assets $ 133,000
Less:
Consideration $ 250,000
Fair value of NCI $ 28,000
Goodwill $ 145,000
Soda limited’s fair value $ 140,000
Net fair value of net assets $ 133,000
Soda limited’s goodwill $ 7,000
Goodwill $ 145,000
Soda limited’s goodwill $ 7,000
Pepsi -Control premium’s goodwill $ 138,000
Consolidation worksheet entries
BCVR entries
Plant Account Dr. $ 4,000
Deferred tax liability Account Cr. $ 1,200
BCVR Account Cr. $ 2,800
Depreciation expense Account Dr. $ 400
Retained earnings Account Dr. $ 800
Accumulated depreciation account Cr. $ 1,200
Deferred tax liability Account Dr. $ 360
Income tax expense Account Cr. $ 120
Retained earnings Account Cr. $ 240

Land Account Dr. $ 5,000
Deferred tax liability Account Cr. $ 1,500
BCVR Account Cr. $ 3,500
Consumer list Account Dr. $ 18,000
Deferred tax liability Account Cr. $ 5,400
BCVR Account Cr. $ 12,600
Goodwill Account Dr. $ 7,000
BCVR Account Cr. $ 7,000
Pre-acquisition entries
at 1 July 2015
Retained earnings Account Dr. $ 23,680
Goodwill Account Dr. $ 138,000
BCVR Account Dr. $ 22,400
Share capital Account Dr. $ 64,000
General reserve Account Dr. $ 1,920
Investment in Soda Account Cr. $ 250,000
at 30 June 2018
Retained earnings Account Dr. $ 25,360
Goodwill Account Dr. $ 138,000
Share capital Account Dr. $ 64,000
BCVR Account Dr. $ 20,720
General reserve Account Dr. $ 1,920
Investment in Soda Account Cr. $ 250,000
NCI share of equity at acquisition date
Share capital Account Dr. $ 16,000
General reserve Account Dr. $ 480
Retained earnings Account Dr. $ 5,920
BCVR Account Dr. $ 5,600
NCI Account Cr. $ 28,000

Changes in equity’s NCI share
Retained earnings Account Dr. $ 1,280
BCVR Account Cr. $ 420
NCI Account Cr. $ 860
NCI share of profit Account Dr. $ 2,880
NCI Account $ 2,880
NCI Account Dr. $ 1,600
Dividend paid Account Cr. $ 1,600
NCI Account Dr. $ 800
Dividend declared Account Cr. $ 800
Movements in fair value [OCE] Account Dr. $ 320
NCI Account Cr. $ 320
Dividend paid and declared
Dividend revenue Account Dr. $ 6,400
Dividend paid Account Cr. $ 6,400
Dividend revenue Account Dr. $ 3,200
Dividend declared Account Cr. $ 3,200
Dividend payable Account Dr. $ 3,200
Dividend receivable Account Cr. $ 3,200
Unrealized profit in inventory
Retained earnings Dr. $ 1,400
Income tax expenses Dr. $ 600
Cost of sale Cr. $ 2,000
Sales Dr. $ 48,000
Cost of sale Cr. $ 44,000
Inventory Cr. $ 4,000

Deferred tax assets Dr. $ 1,200
Income tax expenses $ 1,200
NCI adjustment
NCI Dr. $ 560
NCI share of profit Cr. $ 560
Non-current asset transfer
Retained earnings Dr. $ 2,800
Deferred tax assets Dr. $ 1,200
Plant Cr. $ 4,000
NCI Dr. $ 560
Retained earnings Cr. $ 560
Depreciation on non-current asset transfer
Depreciation expense Dr. $ 400
Retained earnings Cr. $ 400
Income tax expenses Dr. $ 120
Deferred tax assets Cr. $ 120
Retained earnings Dr. $ 56
NCI Cr. $ 56
Intergroup service
Management and consulting fees Dr. $ 4,000
Administrative expenses Cr. $ 1,760
Manufacturing expense Cr. $ 2,240
Debentures
Debentures Dr. $ 80,000
Debentures in Soda Ltd Cr. $ 80,000

Debenture interest revenue Dr. $ 4,000
Financial expense Cr. $ 4,000
Interim Dividend paid
Dividend from Soda Ltd Dr. $ 6,400
Interim Dividend paid Cr. $ 6,400
Dividend payable Dr. $ 3,200
Dividend declared Cr. $ 3,200
Answer 2
Acquisition analysis
Share capital $ 560,000
Retained earnings $ 54,000
Plant and equipment’s fair value adjustment $ 14,000
Fair value of net assets $ 628,000
Assets acquired by Star Ltd (628000*35%) $ 219,800
Acquisition cost $ 300,000
Goodwill $ 80,200
Consolidation entries
Investment in A Ltd Dr. $ 300,000
Cash Cr. $ 300,000
(Recording of acquisition of shares of A Ltd)
Equity in Investee Income Dr. $ 7,000
Investment in A Ltd Cr. $ 7,000
(Recording of amortization of plant and equipment)
Investment in A Ltd Dr. $ 44,100
Equity in Investee Income Cr. $ 44,100
(Accrue 35% of the reported earnings)
Dividend revenue Dr. $ 10,500
Investment in A Ltd Cr. $ 10,500

(Recording of cash dividend)
Investment in A Ltd Dr. $ 9,800
Asset revaluation reserve Cr. $ 9,800
(Post-acquisition reserve)
Equity in Investee Income Dr. $ 3,500
Investment in A Ltd Cr. $ 3,500
(Recognition of unrealized gross profit)
Answer 3
Transaction 1
Date Particulars Amount Amount
13-06-18 Foreign customer Receivable Dr. $ 99,713
Sales revenue Cr. $ 99,713
(Recording of sale transaction)
30-06-18 Foreign exchange loss Dr. $ 2,625
Foreign customer Receivable Cr. $ 2,625
(Recording of Foreign exchange loss)
10-07-18 Cash at bank Dr. $ 95,398
Foreign exchange loss Dr. $ 1,689
Foreign customer Receivable Cr. $ 97,087
(Settlement of sale transaction)
Transaction 2
Date Particulars Amount Amount
15-06-18 Plant and equipment Dr. $106,841
Payable to foreign supplier Cr. $106,841
(Recording of purchase transaction)
30-06-18 Payable to foreign supplier Dr. $ 6,661
Foreign exchange gain Cr. $ 6,661
(Recording of Foreign exchange gain)

20-07-18 Payable to foreign supplier Dr. $100,180
Foreign exchange loss Dr. $ 10,309
Cash at bank Cr. $110,489
(Settlement of sale transaction)

References
Deegan, C. (2012). Australian financial accounting. McGraw-Hill Education Australia.
Harris, T. S., & Rajgopal, S. (2018). Foreign Currency: Accounting, Communication and
Management of Risks. Columbia Business School.