Corporate Accounting Question and Answer 2022

CORPORATE ACCOUNTING 1
CORPORATE ACCOUNTING

CORPORATE ACCOUNTING 2
Question 1:
A
)
If Bolan dos not prepare Consolidated financial
statements, investment in Rex Ltd is to be recognised at
Cost or in accordance with AASB9
NCI calculation
Share Capital
3,
00,0
00
Retained Earnings (30/06/20)
60,2
40
3,
60,2
40
NCI - 60%
2,
16,1
44
B
)
If Bolan prepares Consolidated financial statements,
investment in Rex Ltd is to be recognised under Equity
method
Journal Entries
Dr. Cr.

CORPORATE ACCOUNTING 3
Dividend A/c
8,64
0
Investment in Rex Ltd.
8,6
40
(Elimination of Dividend = 40% of (9600+12000)
Gain on Sale of Motor Vehicle A/c
2,
880.
00
Investment in Rex Ltd
2,
880
.00
(Elimination of Gain on Sale of Motor Vehicle = 40% of
(28800-21600)
Retained Earnings
576.
00
Investment in Rex Ltd
576
.00
(Adjustment of Depreciation on Motor Vehicle =40% of
(43200*.2-4320-2880)

CORPORATE ACCOUNTING 4
Tax Expense
1,
036.
80
Deferred Tax
1,
036
.80
(Tax Impact on Difference in Carrying Value of Motor
Vehicle)
Investment in Rex Ltd.
768.
00
Retained Earnings
768
.00
(Elimination of Unrealised Profit in Opening Inventor of
Rex Ltd)
Tax Expense
230.
40
Deferred Tax
230
.40
(Tax impact on Unrealised Profit in Opening Inventory)

CORPORATE ACCOUNTING 5
Cost of Goods Sold
1,
536.
00
Inventory
1,
536
.00
(Elimination of Unrealised Profit in Closing Inventory of
Bolan Ltd)
Deferred Tax
460.
80
Tax Expense
460
.80
(Tax impact on Unrealised Profit in Closing Inventory
Inventory)
NCI calculation
Share Capital
3,
00,0
00
Retained Earnings (30/06/20)

CORPORATE ACCOUNTING 6
60,2
40
Add: Dividend
21,6
00
3,
81,8
40
NCI - 60%
2,
29,1
04
Question 2:
Consolidation Worksheet Journal Entries at 30 June
2019
Retained Earnings Dr.
5,6
00
Accumulated Depreciation Cr.
5,6
00
(Dep on Plant for the year 30 June 2018)
Deferred Tax Dr. 1,6

CORPORATE ACCOUNTING 7
80
Retained Earnings Cr.
1,6
80
(Reversal of Deferred Tax recognised on Plant FV)
Depreciation expense Dr.
2,8
00
Accumulated Depreciation Cr.
2,8
00
(Dep on Plant from 1 July 2018 to 31 Dec 2018)
Deferred Tax Dr.
8
40
Income Tax Expense Cr.
8
40
(Reversal of Deferred Tax recognised on Plant FV)
Retained earnings Dr.
2,6
25
Cost of Goods Sold Cr.
2,6
25
(Elimination of Unrealised Profit in Opening Inventory)
Income Tax Expense Dr.
7
88
Deferred tax Cr. 7

CORPORATE ACCOUNTING 8
88
(Reversal of Deferred Tax on Unrealised Profit in Op.
Invetory)
Dividend Paid Dr.
32,5
50
Dividend Received Cr.
32,5
50
(Elimination of Dividend)
Acquisition Analysis
Equity of Clock Ltd
Share Capital
2,80,0
00
General reserve
1,12,0
00
Retained earnings
56,0
00
a
4,48,0
00
Fair Value Adjustments
Land
22,4
00
Plant 28,0

CORPORATE ACCOUNTING 9
00
Inventory
35,0
00
Accounts receivable
-
7,000
Goodwill
-
5,600
b
72,8
00
Tax Impact on FV adjustments c=b*30%
-
21,840
Fair Value of Net Assets a+b+c
4,98,9
60
75% Shares acquired by Ormolu d
3,74,2
20
Consideration Paid e
3,30,9
60
Gain on bargain purchase d-e
43,2
60
NCI share of equity - 25%
(a+b+c)*25
%
1,24,7
40
Business Combination Valuation Entries
Land A/c Dr.
22,4
00
Plant A/c Dr. 28,0

CORPORATE ACCOUNTING 10
00
Inventory A/c Dr.
35,0
00
Accounts receivable A/c Cr.
7,0
00
Goodwill A/c Cr.
5,6
00
Deferred Tax A/c Cr.
21,8
40
Business Combination Valuation Reserve A/c Cr.
50,9
60
Pre-acquisition Entry
Share Capital A/c Dr.
2,10,0
00
General Reserve A/c Dr.
84,0
00
Retained Earnings A/c Dr.
42,0
00
Business Combination Valuation Reserve A/c Dr.
38,2
20
Investment in Clock Ltd. Cr.
3,30,9
60
Gain on Bargain Purchase Cr.
43,2
60
(For acquiring 75%)

CORPORATE ACCOUNTING 11
Non-Controlling Interest
On the Acquisition Date
Fair Value of Net Assets
4,98,9
60
NCI - % 25%
1,24,7
40
Non-Controlling Interest
On 1 July 2018
Fair Value of Net Assets on 1 July 2017
4,98,9
60
Add: Profit for the year
1,82,0
00
Less: Dividend Paid
-
11,200
Less: Dividend Declared
-
21,000
Less: Additional Depreciation on Plant
-
5,600
Add: Tax on Additional Depreciation
1,6
80
6,44,8
40
NCI - % 25% 1,61,2

CORPORATE ACCOUNTING 12
10
Non-Controlling Interest
On 30 June 2019
Fair Value of Net Assets on 1 July 2018
6,44,8
40
Add: Profit for the year
2,10,0
00
Less: Additional Depreciation on Plant till 31 Dec 2018
-
2,800
Add: Tax on Additional Depreciation
8
40
Less: Dividend Paid
-
22,400
8,30,4
80
NCI - % 25%
2,07,6
20
Question 3:
Liquidation A/c
Particulars Amou Particulars Amou

CORPORATE ACCOUNTING 13
nt nt
Land & Building
1,75
,000 Cash Proceeds from sale of assets
4,35
,400
Plant
2,80
,000
Sale of Secured Assets (Land &
Building)
2,68
,800
Accounts Receivable
68
,600 Retained Earnings
7
,000
Bank Deposit
7
,000 Accounts Payables - Discount
2
,800
Investments
35
,000
Inventory
84
,000
Income Tax Penalty
2
,100
Debenture Interest
5
,250
Liquidator's Remuneration
17
,500
Liquidation Expenses
7
,700
Employee Payments
9
,800
Liquidation Surplus (balancing
figure)
22
,050
7,14 7,14

CORPORATE ACCOUNTING 14
,000 ,000
Liquidator's Statement of Receipts & Payments
Receipts
Amou
nt Payments
Amou
nt
Bank Deposit
8
,400 Income Tax Penalty
2
,100
Accounts Receivable
63
,000 Liquidator's Remuneration
17
,500
Investments
21
,000 Liquidation Expenses
7
,700
Inventory
70
,000 Debentures including interest
75
,250
Surplus from Sale of Secured
Assets (Land & Building)
1,63
,800 Bank Overdraft
56
,000
Plant & Equipment
2,73
,000 Accounts Payable
53
,200
Employee Payments
9
,800
Other Payables to Directors
33
,600
Surplus for Distribution to
Shareholders (balancing figure)
3,44
,050
5,99 5,99

CORPORATE ACCOUNTING 15
,200 ,200
Shareholders' Distribution A/c
Particulars
Amo
unt Particulars
Amo
unt
Payment to Shareholders
3,44
,050 Share Capital
3,22
,000
Liquidation Surplus
22
,050
3,44
,050
3,44
,050
Question 4:
Non-controlling interest:
The amount of the share capital or the number of the shares that are left out after the share or
the percentage of the holding company are termed as the minority interest or the non-
controlling interest. For example, if the holding company takes over about 60% of the shares
or the share capital of the subsidiary company, then the remaining shares which would be
calculated by (100-60) % equals to 40% shall be termed as the non-controlling interest or the
minority interest. In other words, this is the % of the share capital in the subsidiary company
on which the holding company does not have any control. They are independent

CORPORATE ACCOUNTING 16
shareholders. Now, they are independent since the shareholders may not be interested in the
holding company or for any other reason whatsoever. These are the normal shareholders but
over which the holding company does not have any sort of controls. That’s the only
difference between that 40% shares and 60% shares. These shareholders of the remaining
40% are the ones that are entitled to the 40% of the profits that have been earned by the
subsidiary company, to the 40% of the amounts of the dividend paid by the subsidiary
company etc. there is as stated earlier no difference (Small business chron, 2019). The
holding shall be entitled to 60% of the profits that have been earned by the subsidiary
company, to the 60% of the amounts of the dividend paid by the subsidiary company etc. in
the future years as well, the minority interest would be entitled to their share in the profits
earned by the subsidiary company and the appropriate share in the dividends, if paid by the
subsidiary company to 40% of any income or dividend received by the subsidiary company.
And the sum total of this amount shall be reported in the consolidated balance sheet under the
head of non-current liabilities. This is due to the reason that since they are not payable within
the period of 1 operating cycle or 12 months, these have to be reported as the noncurrent
liabilities. The following is the way through which this amount of minority interest is
calculated: (Wall Street mojo, 2019).
 The appropriate % (40%) of the minority interest is taken and multiplied with the
entire shareholders equity, reserves and retained earnings
 Any amount of profit is added multiplied with 40%(given case), or loss of 40% shall
be deducted from the above amount
 Any amount of dividend paid to the tune of 40% shall be deducted from the above
calculated amount
The above additions and the subtraction gives us the total amount of the non-controlling
interest (Accounting tools, 2019).

CORPORATE ACCOUNTING 17
References:
Wallstreetmojo.com. (2019). Minority Interest - Complete Beginner's Guide (examples).
[online] Available at: https://www.wallstreetmojo.com/minority-interest-guide-examples/
[Accessed 11 Oct. 2019].
AccountingTools. (2019). Minority interest — AccountingTools. [online] Available at:
https://www.accountingtools.com/articles/2017/7/28/minority-interest [Accessed 10 Oct.
2019].
Smallbusiness.chron.com. (2019). Is Minority Interest an Asset or a Liability?. [online]
Available at: https://smallbusiness.chron.com/minority-interest-asset-liability-65891.html
[Accessed 10 Oct. 2019].