Consolidation of Financials for Ghostbusters Ltd: Steps, Entries, and Worksheet

This article explains the steps, entries, and worksheet for the consolidation of financials for Ghostbusters Ltd. It covers the preparation of acquisition analysis, business combination valuation entries, pre-acquisition entries, and other consolidation entries. The article also includes a consolidated worksheet for Ghostbusters Ltd and Bat Ltd.

Consolidation of financials is a lengthy process, which involves few steps. The steps and consolidation of
Ghostbusters Ltd. is as below:
Step-1 Preparation of Acquisition Analysis as on 1 July, 2018
Descriptions Amount
Share capital $ 200,000
General reserve $ 25,000
Retained earnings $ 45,000
Fair value:- Plant and equipment ((190000-186000)*(1-30%)) $ 2,800
Fair value:- Trademark ((110000-100000)*(1-30%)) $ 7,000
Fair value:- Inventories ((80000-70000)*(1-30%)) $ 7,000
Fair value:- Land ((70000-50000)*(1-30%)) $ 14,000
Fair value:- Machinery ((16000-15000)*(1-30%)) $ 700 $ 31,500
Fair value of net assets acquired $ 301,500
Less: Goodwill already recorded $ (25,000)
$ 276,500
Cost of Investment $ 305,000
Goodwill to be recorded $ 28,500
Step-2 Business combination valuation entries at 30 June 2020
Description Amount
Gain (loss) on sale of non-current assets $ 20,000
To Income tax expense $ (6,000)
To Transfer from BCVR $ (14,000)
(Being sale of fair valued land recorded)
Trademark $ 10,000
To Deferred tax liability $ (3,000)
To BCVR $ (7,000)
(Being fair valuation of trademark recorded)
Accumulated depreciation - P&E $ 114,000
To Plant and equipment $ (110,000)
To Deferred tax liability $ (1,200)
To BCVR $ (2,800)
(Being fair valuation of Plant recorded)
Depreciation expense - P&E $ 800
Retained earnings (1/7/19) $ 800
To Accumulated depreciation - P&E ($4 000/5) $ (1,600)
(Being depreciation on above plabt fair valuation recorded)
Deferred tax liability $ 480
To Income tax expense $ (240)

To Retained earnings (1/7/19) $ (240)
(Being tax impact on above entry recorded)
Depreciation expense – machinery $ 125
Gain (loss) on sale of non-current assets $ 625
Retained earnings (1/7/19) $ 175
To Income tax expense $ (225)
To Transfer from BCVR $ (700)
(Being sale of fair valued machinery recorded)
Step-3 Pre- acquisition entries at 30 June 2020
Description Amount
Share capital $ 200,000
General reserve $ 25,000
Retained earnings (1/7/19) ($45,000+$7000) $ 52,000
BCVR $ 24,500
Goodwill $ 28,500
To Shares in Bat Ltd $ (330,000)
(Being pre acquisition entry as on 30/6/20 recorded)
Transfer from BCVR $ 14,000
To BCVR $ (14,000)
(Being transfer of amount on sale of land recorded)
Transfer from BCVR $ 700
To BCVR $ (700)
(Being transfer of amount on sale of machinery recorded)
Shares in Bat Ltd $ 5,000
To Interim dividend paid $ (5,000)
(Being interim dividend received)
Step-4 Other consolidation entries at 30 June 2020
Sr. No. Description Amount
3 Dividend revenue $ 5,000
To Interim dividend paid $ (5,000)
(Being interim dividend paid)
4 Dividend payable $ 4,000
To Final dividend declared $ (4,000)
(To eliminate the dividend paid and payable)

Dividend revenue $ 4,000
To Dividend receivable $ (4,000)
(To eliminate the dividend revenue and receivable)
5 Retained earnings (1/7/19) $ 2,800
Income tax expense $ 1,200
To Cost of sales $ (4,000)
(Being elimination of profit from opening inventory recorded)
6 Gain (loss) on sale of non-current assets $ 5,000
To Inventory $ (5,000)
(Being intercompany transfer of plant treated as inventory recorded)
Deferred tax asset $ 1,500
To Income tax expense $ (1,500)
(Being tax impact on above recorded)
7 Sales $ 8,000
To Cost of sales $ (7,000)
To Inventory $ (1,000)
(Being elimination of profit in ending inventory recorded)
Deferred tax asset $ 300
To Income tax expense $ (300)
(Being tax impact on above recorded)
8 Sales $ 18,000
To Cost of sales $ (16,000)
To Inventory $ (2,000)
(Being elimination of intercompany sale of inventory recorded)
Deferred tax asset $ 600
To Income tax expense $ (600)
(Being tax impact on above recorded)
9 Retained earnings (1/7/19) $ 700
Deferred tax asset $ 300
To Furniture $ (1,000)
(Being elimination of profit in sale of furniture recorded)
10 Accumulated depreciation - furniture $ 150
To Depreciation expense $ (100)
To Retained earnings (1/7/19) $ (50)
(Being depreciation on above profit elimination recorded)

Income tax expense $ 30
Retained earnings (1/7/19) $ 15
To Deferred tax asset $ (45)
(Being tax impact of above transaction recorded)
11 Land $ 5,000
To Gain (loss) on sale of non-current assets $ (5,000)
(Being elimination of profit from intercompany sale of land
recorded)
Income tax expense $ 1,500
To Deferred tax liability $ (1,500)
(Being tax impact of above transaction recorded)
Loan from Ghostbusters Ltd $ 12,000
To Loan to Bat Ltd $ (12,000)
(Being elimination of intercompany loan transaction recorded)
Step-5 Consolidated Worksheet
Income Statement Ghost Ltd Bat Ltd No. Adjustments No. Group
Dr Cr
Sales revenue $ 220,000 $ 182,000 7, 8 $ 26,000 $ 376,000
Other income $ 62,000 $ 20,000 3,4 $ 9,000 $ 73,000
$ 282,000 $ 202,000 $ 449,000
Cost of sales $ 162,000 $ 128,000 $ 27,000 5,7,8 $ 263,000
Other expenses $ 53,000 $ 41,000 1 $ 925 $ 100 10 $ 94,825
$ 215,000 $ 169,000 $ 357,825
Trading profit $ 67,000 $ 33,000 $ 91,175
Gains/losses on sale of non-
current assets $ 22,000 $ 25,000 1,6 $ 25,625 $ 5,000 11 $ 26,375
Profit before tax $ 89,000 $ 58,000 $ 117,550
Tax expense $ 20,000 $ 18,000 5, 10, 11 $ 2,730 $ 8,865 1,6,7,
8 $ 31,865
Profit $ 69,000 $ 40,000 $ 85,685
$ 30,000 $ 45,000 1,2,5,9,1
0 $ 56,490 $ 290 1,10 $ 18,800
Retained earnings (1/7/19) $ - $ - 2 $ 14,700 $ 14,700 1 $ -
$ 99,000 $ 85,000 $ 104,485
Dividend paid $ 12,000 $ 10,000 $ 10,000 2,3 $ 12,000
Dividend declared $ 6,000 $ 4,000 $ 4,000 4 $ 6,000
$ 18,000 $ 14,000 $ 18,000
Retained earnings (30/6/20) $ 81,000 $ 71,000 $ 86,485

Share capital $ 312,000 $ 200,000 2 $ 200,000 $ 312,000
General reserve $ 20,000 $ 25,000 2 $ 25,000 $ 20,000
BCVR $ - $ - 2 $ 9,800 $ 9,800 1 $ -
Total Equity $ 413,000 $ 296,000 $ 418,485
Deferred tax liabilities $ - $ - 1 $ 480 $ 5,700 1,11 $ 5,220
Dividend payable $ 6,000 $ 4,000 4 $ 4,000 $ 6,000
Current tax liability $ 8,000 $ 2,500 $ 10,500
Loan from Ghost Ltd $ - $ 12,000 11 $ 12,000 $ -
Provisions $ 78,000 $ 169,500 $ 247,500
Total Liabilities $ 92,000 $ 188,000 $ 269,220
Total Liabilities + Equity $ 505,000 $ 484,000 $ 687,705
Assets
Shares in Bat Ltd $ 325,000 $ 325,000 2 $ -
Cash $ 7,800 $ 35,000 $ 42,800
Inventory $ 20,000 $ 50,000 $ 8,000 6,7,8 $ 62,000
Receivables $ 6,000 $ 20,000 $ 4,000 4 $ 22,000
Land $ 25,000 $ 50,000 11 $ 5,000 $ 80,000
Plant & equipment $ 113,000 $ 300,000 $ 110,000 1 $ 303,000
Accumulated depreciation – P
& E $ (34,000) $ (114,000) 1 $ 114,000 $ 1,600 1 $ (35,600)
Machinery $ 15,000 $ 15,000 $ 30,000
Accumulated depreciation –
Mach. $ (1,000) $ (3,000) $ (4,000)
Furniture $ 7,000 $ 8,000 $ 1,000 9 $ 14,000
Accumulated depreciation –
Furn. $ (1,000) $ (2,000) 10 $ 150 $ (2,850)
Trademark $ 100,000 1 $ 10,000 $ 110,000
Goodwill $ 25,000 2 $ 28,500 $ 53,500
Deferred tax assets $ 10,200 6,7,8,9 $ 2,700 $ 45 10 $ 12,855
Loan to Bat Ltd $ 12,000 $ 12,000 11 $ -
Total assets $ 505,000 $ 484,000 $ 687,705