Corporate Accounting and Reporting

This document covers acquisition analysis, business combination valuation, and pre-acquisitions worksheet journals in corporate accounting and reporting. It includes computations of assets taken over, income statements, consolidated financial statements, adjustments, and business combination entries.

Corporate accounting and reporting

Accounting
1. Acquisition analysis
Computation of Assets taken over 1.7.17 30.6.18
Share Capital 54,000.00 54,000.00
Retained Earnings 36,000.00 44,300.00
Asset Revaluation Reserve 18,000.00 20,000.00
Inventory revaluation 1,400.00 140.00
Machinery revaluation 1,050.00 840.00
Total 1,10,450.00 1,19,280.00
Post Acquisition Profit 8,830.00
Payment of consideration 1,10,000.00 1,10,000.00
-
Goodwill on Acquisition -450.00
Income Statement
Ethan Ltd Darren ltd
PBT 1,20,000.00 12,500.00
Tax Expense -56,000.00 -4,200.00
Profit 64,000.00 8,300.00
Retained Earning 80,000.00 36,000.00
Transferred to General reserve - -3,000.00
Closing Retained Earning 1,44,000.00 41,300.00
Adjustments
Subsidiary Share 8,830.00 (119280-110450)
Total 1,52,830.00
2. business combination valuation
Consolidated Financial Statements of Ethan Ltd 30.6.18
Ethan Ltd Darren ltd Consolidated
Share Capital 3,60,000.00 54,000.00 3,60,000.00
Retained Earning
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Accounting
1,44,000.00 41,300.00 2,450.00
General Reserve 10,000.00 3,000.00 10,000.00
Asset Revaluation Surplus 18,500.00 20,000.00 18,500.00
Liabilities 42,500.00 13,000.00 55,500.00
Total 5,75,000.00 1,31,300.00 4,46,450.00
Goodwill(Business Combination Valuation
Reserve)
-
450.00
Land 1,60,000.00 20,000.00 1,80,000.00
Plant and Machinery 3,60,000.00 1,25,600.00 4,86,440.00
Depreciation
-
1,10,000.00
-
33,000.00
-
1,43,000.00
Inventory 55,000.00 18,700.00 73,840.00
Shares in Darren Ltd 1,10,000.00 -
5,75,000.00 1,31,300.00 5,96,830.00
3. Pre- Acquisitions “ worksheet Journals
Adjustments
Cost of Sales Ac Dr 300
To, Machinery AC 300
Revaluation of inventory and stock leftover 200
Business Combination Entries
Share Capital 54000
Retained Earnings 36000
Asset Revaluation Reserve 18000
Revaluation Reserve 2450
To shares of Darren Ltd
(consideration paid) 1,10,000.00
To Gain on Business Purchase 450
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Accounting
In consolidated financial statements Investment in Shares of Darren Ltd will not come as all
other asset and liability are added line by line items and thus effect on equity is taken. Any
difference in the given consolidation adjustments are shown as Goodwill or Business
Combination Valuation Reserve. As there is gain on acquisition in the given case so reserve
of $450 is to be created in Consolidated Financial Statements only and this will not impact
any of the separate financial statements of both the company (Brealey, Myers & Allen, 2011).
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Accounting
Bibliography
Brealey, R, Myers, S & Allen, F. (2011) Principles of corporate finance. New York:
McGraw-Hill/Irwin.
Albrecht, W., Stice, E. & Stice, J. (2011) Financial accounting. Mason, OH:
Thomson/South-Western.
Choi, R.D. and Meek, G.K. (2011) International accounting. Pearson .
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