Financial Statement Analysis Example

This assignment presents a set of example financial statements, including balance sheet and income statement, along with an analysis of key components like assets, liabilities, equity, and profits. It provides insights into the company's financial health, covering both current and non-current items. The analysis also includes details about dividend payments, share capital, reserves, and retained earnings.

Running Head: Corporate Accounting
Corporate Accounting

Corporate Accounting 2
QUESTION 1
Amount
Share capital 150000
Reserves 10000
retained earnings 30000
Dividend 6000
Goodwill 5000
Purchase consideration 130000
Carrying
amount
Fair
value
Plant(Cost) 94000 96000
Land 80000 95000
Inventory 20000 26000
A. Worksheet entries as at 30 June 2017
1. Business Combination valuation entries
Accumulated depreciation Dr 26000
Plant Cr 24000
Deferred Tax liability Cr 600
Business combination valuation Reserve Cr 1400
(Being Depreciation and deferred tax liability recognised)
Depreciation Expense Dr 200
Retained Earnings (01/07/16) Dr 600
Accumulated Depreciation Cr 800
(1/10 x $2000p.a for 4 years)
Deferred Tax Liability Dr 240
Income Tax Expense Cr 60
Retained Earnings Cr 180
(Being deferred Tax liability transferred)
Amortisation Expense- Database Dr 1500
Retained earnings (01/07/16) Dr 3150
Income Tax Expense Cr 450
Transfer from Business Cr 4200
Combination Valuation Reserve
(Being database amortisation expenses transferred)
Transfer from Business combination Valuation
Reserve Dr 7000

Corporate Accounting 3
Income Tax expense Dr 3000
Damage Expense Cr 7500
Gain Cr 2500
(Being Gain on damage expenses recognised)
Actual impairment losses- Goodwill Dr 7000
Business Combination Valuation Reserve Dr 2400
Goodwill Cr 9400
(Being impairment loss on goodwill recognised)
At 1 July 2013
Net Fair value of Identifiable Assets and Liabilities of Sam Ltd
 Equity ($150000 + $10000+ $30000)
 Plant Add {$ 2000*(1-30%)}
 Land Add {$ 15000*(1-30%)}
 Inventory Add {$ 6000*(1-30%)}
 Database Add {$ 6000*(1-30%)}
 Damages payable Subtract {$ 9000*(1-30%)}
 Goodwill Subtract ($5000)
= $199000
Consideration Paid = $130000 – Dividend Receivable ($6000)
$ 124000
Capital Reserve = (Fair value – Consideration Paid)
= ($199000 - $124000)
= $75000
Recorded Goodwill = $ 5000
Transfer to Capital reserve = $ 70000.
2. Pre-Acquisition Entries
At 01/07/2013
Retained Earnings (01/07/2013) Dr 30000
Share Capital Dr 150000
Reserve Dr 10000
Business Combination Valuation Reserve Cr 66000
Shares in Sam ltd 124000
(Being Business Transferred)

Corporate Accounting 4
Dividend payable Dr 6000
Dividend receivable Cr 6000
(Being dividend received)
At 30/06/2017, the entry on the acquisition date is effected by:
o The sale of inventory in previous period
o Payment of dividend that is $6000 in previous period
o Sale of land in previous period
o Transfer from reserve $ 3000- in prior period
o Transfer from reserve $2000- in current period
o Settlement of court case in current period
o De-recognition of Database in current period
* Retained earnings =
30000 (Opening Balance)
+ $4200(BVCR Inventory)
+ $10500(BVCR Land)
+ $3000(transfer to reserve)
Retained Earnings (01/07/2016)* Dr 47700
Share Capital Dr 150000
Reserves Dr 2000
Business valuation Combination Reserve Cr 75700
Shares in Sam Ltd Cr 124000
(Being business transferred and reserve created)
Transfer from Reserve Dr 2000
Reserve Cr 2000
(Being reserve balance transferred)
Business Combination Valuation Reserve Dr 7000
Transfer from Business Combination Valuation
Reserve Cr 7000
Transfer from Business Combination Valuation Reserve Dr 4200
Business Combination Valuation Reserve Cr 4200

Corporate Accounting 5
Question 2
Statement of
Changes in Equity
Share
Capital
General
Reserve
Other
Components
Retained
Earnings
Total
Equity
$000 $000 $000 $000 $000
Balance at 01-July-
2015 2400 260 80
Profit for period
Dividend 256
Issue of Share Capital 30 -30
Total Income for the
Period -256 581
Balance at 30 June 2400 290 375 3065
Statement of Financial Position
(As at 30 June 2016)
Particulars Notes $000 $000
01-Jul-
15
30-Jun-
16
Assets
Current
Accounts receivable 600
Other Debtors 50
Inventories 520
Current 1170
Non-Current
Plant and Equipment(After
Depreciation) 800
Land 600
Building(After depreciation) 900
Goodwill 300
Long-term Investment 460
Non-Current 3060
Total Assets 4230
Liabilities
Current
Accounts payable 400
Income Tax Payable 249
Dividend payable 1 256
Non- Current

Corporate Accounting 6
Allowance for impairment of
Receivables 2 60
Bank Overdraft 200
Net Assets 3065
Equity
Share Capital 3 2400
General Reserve 4 260 290
Retained earnings 5 80 375
Total Equity 3065
Notes:
1. Dividend 8c per share and no. of shares 3200000.
2. Contingent liability
3. 3200000 shares
4. 30000 shifted from previous year
5. 581000 Profit- 256000 dividend- 30000 reserve+ 80000 previous year profits.

Corporate Accounting 7
References:
Albrecht, W., Stice, J. & Swain, M. 2007, Accounting: Concepts and Applications, Cengage
Learning.
Healy, P. M. & Palepu, K. G. 2012, Business Valuation analysis: Using Financial
Statements, Cengage Learning, USA.
Ittelson, T. R. 2009, Financial Statements: A Step-by- Step Guide to Understanding and
Creating Financial Reports, Red Wheel/Weiser, USA.
Stickney, C. P., Wiel, R. L., Schipper, K & Francis, J. 2009, Financial Accounting: An
Introduction to Concepts, Methods and Uses, Cengage Learning.