Preparing Consolidated Financial Statements for Erik Ltd's Group

This document provides a step-by-step guide on how to prepare consolidated financial statements for Erik Ltd's group at 1 July 2017. It includes calculation analysis, consolidation journal entries, consolidated worksheet, and financial consolidated statement.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
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1CORPORATE ACCOUNTING
Table of Contents
1. Preparing the consolidated financial statements for Erik Ltd’s group at 1 July 2017...........2
Calculation analysis:..................................................................................................................2
Consolidation journal entries:....................................................................................................2
Consolidated worksheet:............................................................................................................3
Financial consolidated statement:..............................................................................................4
2. Preparing the consolidated worksheet entries for Erik Ltd’s group at 30 June 2018:...........5
3. Report on financial analysis and calculation:.........................................................................7
References and Bibliography:....................................................................................................9

2CORPORATE ACCOUNTING
1. Preparing the consolidated financial statements for Erik Ltd’s group at 1 July 2017
Calculation analysis:
Net fair value of identifiable assets
and liabilities of Finn Ltd + ($90,000 + $12,000 + $36,000)
+ ($43,000 – $35,000) (1 – 30%)
+ ($46,000 – $42,000) (1 – 30%)
+ $12,000 (1 – 30%)
– $3,000 (1 – 30%)
Net fair value =$152,700
Net consideration transferred = $151,000 – $12,600
= $138,400
Previously acquired equity interest = $15,400
Goodwill = ($138,400 + $15,400) – $152,700
= $1,100
Consolidation journal entries:
Business combination valuation entries
Particulars Amount Amount
1 Accumulated Depreciation……..Dr 11,000.00
Plant 3,000.00
Deferred tax liability 2,400.00
BCVR 5,600.00
2 Inventories…………………Dr 4,000.00
Deferred tax liability 1,200.00
BCVR 2,800.00
3 Research and development……..Dr 12,000.00
Deferred tax liability 3,600.00
BCVR 8,400.00
4 BCVR………………….Dr 2,100.00

3CORPORATE ACCOUNTING
Deferred tax asset……....Dr 900.00
Customer claims 3,000.00
5 Goodwill………………….Dr 1,100.00
BCVR 1,100.00
Pre-acquisition entries
Particulars Amount Amount
6 Share capital………..Dr 90,000.00
Retained earnings…..Dr 36,000.00
General reserve…….Dr 12,000.00
BCVR………………Dr 15,800.00
Shares in Finn Ltd 153800
7
Dividend Payables………
Dr 12,600.00
Dividend receivable 12,600.00
Consolidated worksheet:
Consolidation worksheet at 30 June 2017
Particulars
Erik Finn
Adjustme
nts Group
Ltd Ltd Dr Cr
Cash
11,000.0
0
20,600.0
0
31,600.0
0
Receivables
25,200.0
0
20,000.0
0
12,600.0
0 7
32,600.0
0
Other assets
10,000.0
0 8,000.00
3,4,
5 14,000.00
32,000.0
0
Inventory
55,000.0
0
42,000.0
0 2 4,000.00
1,01,000.
00
Shares in Finn
Ltd
1,53,800.
00 -
1,53,800.
00 6 -
Plant
2,10,000.
00
1,07,000.
00 3,000.00 1
3,14,000.
00

4CORPORATE ACCOUNTING
Accum
depreciation
-
85,000.0
0
-
22,000.0
0 1 11,000.00
-
96,000.0
0
3,80,000.
00
1,75,600.
00
4,15,200.
00
Dividend
payable
25,000.0
0
12,600.0
0 7 12,600.00
25,000.0
0
Other liabilities
75,000.0
0
25,000.0
0
10,200.0
0
1,1,2,
3
1,10,200.
00
Share capital
1,30,000.
00
90,000.0
0 90,000.00
1,30,000.
00
Retained
earnings
93,500.0
0
36,000.0
0 36,000.00
93,500.0
0
General reserve
56,500.0
0
12,000.0
0 12,000.00
56,500.0
0
BCVR - - 4,6 17,900.00
17,900.0
0
1,2,3,
5 -
3,80,000.
00
1,75,600.
00
4,15,200.
00
Financial consolidated statement:
Erik Ltd
Consolidated Statement of Financial Position as at 1 July 2017
Particulars Amount Amount
Current assets
Cash 31,600.00
Receivables 32,600.00
Inventory 1,01,000.00
Total current assets 1,65,200.00
Non-Current Assets
Other assets 32,000.00
Plant 3,14,000.00
Accum depreciation -96,000.00
Total non-current assets 2,50,000.00
Total Assets 4,15,200.00

5CORPORATE ACCOUNTING
Current Liabilities
Dividend payable 25,000.00
Other liabilities 1,10,200.00
Total liabilities 1,35,200.00
Equity
Share capital 1,30,000.00
Retained earnings 93,500.00
General reserve 56,500.00
Total equity 2,80,000.00
Total equity and liabilities 4,15,200.00
2. Preparing the consolidated worksheet entries for Erik Ltd’s group at 30 June 2018:
Consolidation worksheet entries at 1 July 2017
Consolidation worksheet entries at 1 July 2017
Business combination valuation entries
Particulars Amount Amount
Accumulated Depreciation……..Dr 11,000.00
Plant 3,000.00
Deferred tax liability 2,400.00
BCVR 5,600.00
Depreciation expense………….Dr 2,000.00
Accumulated depreciation 2,000.00
Deferred tax liability………….Dr 600.00
Income tax expense 600.00
Cost of sales…………………Dr 4,000.00
Deferred tax liability 1,200.00
BCVR 2,800.00
Deferred Research and development……..Dr 12,000.00
Deferred tax liability 3,600.00
BCVR 8,400.00
Amortisation expense……………………Dr 1,200.00
Accumulated amortisation 1,200.00

6CORPORATE ACCOUNTING
Deferred tax liability………….Dr 360.00
Income tax expense 360.00
BCVR………………….Dr 2,100.00
Deferred tax asset……....Dr 900.00
Customer claims 3,000.00
Goodwill………………….Dr 1,100.00
BCVR 1,100.00
Pre-acquisition entries
Particulars Amount Amount
Share capital………..Dr 90,000.00
Retained earnings…..Dr 36,000.00
General reserve…….Dr 12,000.00
BCVR………………Dr 15,800.00
Shares in Finn Ltd 1,53,800.00
Transfer of BCVR……………………..Dr 2,800.00
BCVR 2,800.00
BCVR………………………………Dr 2,100.00
Transfer of BCVR 2,100.00
Consolidation worksheet entries at 30 June 2018
Consolidation worksheet entries at 30 June 2018
Business combination valuation entries
Particulars Amount Amount
Accumulated Depreciation……..Dr 11,000.00
Plant 3,000.00
Deferred tax liability 2,400.00
BCVR 5,600.00
Depreciation expense………….Dr 2,000.00
Accumulated depreciation 2,000.00
Deferred tax liability………….Dr 600.00
Income tax expense 600.00
Cost of sales…………………Dr 4,000.00
Deferred tax liability 1,200.00

7CORPORATE ACCOUNTING
BCVR 2,800.00
Deferred Research and development……..Dr 12,000.00
Deferred tax liability 3,600.00
BCVR 8,400.00
Amortization expense……………………Dr 1,200.00
Accumulated amortization 1,200.00
Deferred tax liability………….Dr 360.00
Income tax expense 360.00
BCVR………………….Dr 2,100.00
Deferred tax asset……....Dr 900.00
Damage expense 2,800.00
Customer claims 200.00
Goodwill………………….Dr 2,360.00
BCVR 2,360.00
Pre-acquisition entries
Particulars Amount Amount
Share capital………..Dr 90,000.00
Retained earnings…..Dr 36,000.00
General reserve…….Dr 12,000.00
BCVR………………Dr 17,060.00
Shares in Finn Ltd 1,55,060.00
Transfer of BCVR……………………..Dr 2,800.00
BCVR 2,800.00
BCVR………………………………Dr 2,100.00
Transfer of BCVR 2,100.00
3. Report on financial analysis and calculation:
The calculations have been conducted on Net fair value of assets and liabilities of
Finn Ltd, which helps in determining the total value of goodwill that has been achieved from
the total consideration transferred. The relevant calculation has been conducted on the
worksheet to derive the combined financial performance of the company during 2017. The

8CORPORATE ACCOUNTING
relevant dividend declared by the subsidiary are adequately presented in the acquisition and
recognized entirely. The relevant entries of the BCVR activities which comprises of
depreciation of the plant during the current period, sale of the inventories during the current
period, amortization of the research and development during the current period, and
settlement of the contingent liability. Moreover, the Pre-acquisition entries mainly comprise
of where relevant Transfer from business-combination valuation reserve and business-
combination valuation reserve are mainly conducted to derive relevant values (Hoyle,
Schaefer and Doupnik 2015). The valuation would eventually help in determining the
goodwill values, which is at the levels of 2,360. The calculations have indicated that the
performance Erik Ltd has increased, where the assets has improved from 380,000 to 415,200.
This improvements indicates about the financial performance of the organization will
relevantly generate high level of income from the acquisition.

9CORPORATE ACCOUNTING
References and Bibliography:
Dandago, K.I. and Rufai, A.S., 2014. Information technology and accounting information
system in the Nigerian banking industry. Asian Economic and Financial Review, 4(5),
pp.655-670.
Gillis, P., Petty, R. and Suddaby, R., 2014. The transnational regulation of accounting:
insights, gaps and an agenda for future research. Accounting, Auditing & Accountability
Journal, 27(6), pp.894-902.
Gillis, P., Petty, R., Suddaby, R. and Nobes, C., 2014. The development of national and
transnational regulation on the scope of consolidation. Accounting, auditing & accountability
journal.
Gray, S.J. ed., 2014. International accounting and transnational decisions. Butterworth-
Heinemann.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Leitner-Hanetseder, S. and Stockinger, M., 2014, March. How does the elimination of the
proportionate consolidation method for joint venture investments influence European
companies. In ACRN Proceedings in Finance and Risk Series 2013: Proceedings of the 13th
FRAP Conference in Cambridge (Vol. 2).
Raudla, R. and Tammel, K., 2015. Creating shared service centres for public sector
accounting. Accounting, Auditing & Accountability Journal, 28(2), pp.158-179.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.