Corporate Accounting: Business Combination, Liquidation, Unrealized Profits and Residual Value
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This report covers various topics in corporate accounting such as business combination, liquidation, unrealized profits, and residual value. It includes journal entries for each topic and references for further reading.
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Project Report: Corporate Accounting
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Que 1: B) $ 18,000 Que 2: D) General purpose financial statements Que 3: C)In the consolidation working papers Que 4: D) Plant and equipment Que 5: C)There is a legal right of set-off and it is permitted by a standard Que 6: C) 21000 Que 7: C) Materiality Que 8: A) Asset revaluation surplus Que 9: B)Prepare and issue accounting standards Que 10: D)Consolidated financial statements
Que 1) Net fair value of identifiable assets and liabilities of White limited 100000+1360000 (Equity) (55000) (Inventory) (260000) (Land)$ 2,045,000 Consideration amount$ 2,700,000 Goodwill amount$655,000 Journal Entries Deferred tax assets55000 Inventory55000 Deferred tax assets260000 Land260000 Accumulated impairment losses20000 Goodwill20000 Que 2) Journal Entries Management fee revenue of Wheel ltd18000 Management fee revenue of Spoke Ltd18000 loan from Wheel limited13000 Loan to Spoke limited13000 Business combination valuation reserve5000 Deferred tax liabilities1500 Inventory3500 Business combination valuation reserve2000 Deferred tax liabilities600 Assets1400
Que 3) Journal Entries Share capital-Dick Ltd100000 Retained earnings50000 General reserve80000 Investment in Dick limited165000 Business combination valuation reserve65000 Profit Share from Lorikeet ltd15000 Profit and loss a/c15000 Que 4) Journal Entries DateParticularsDebitCredit 1/07/2013Cash a/c 12000 0 Plant A a/c 12000 0 (Plant A has been purchased.) 1/07/2013Cash a/c 35000 0 Plant B a/c 35000 0 (Plant B has been purchased.) 30/06/201 4Depreciation on plant A a/c10000 Plant A a/c10000 (Depreciation has been levied on plant A) 30/06/201 4Depreciation on plant B a/c70000 Plant B a/c70000 (Depreciation has been levied on plant B) 30/06/201 4Accumulated depreciation a/c10000 Depreciation on plant A a/c10000 (Depreciation has been transferred into accumulated depreciation)
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30/06/201 4Accumulated depreciation a/c70000 Depreciation on plant B a/c70000 (Depreciation has been transferred into accumulated depreciation) 30/06/201 5Depreciation on plant A a/c10000 Plant A a/c10000 (Depreciation has been levied on plant A) 30/06/201 5Depreciation on plant B a/c70000 Plant B a/c70000 (Depreciation has been levied on plant B) 30/06/201 5Accumulated depreciation a/c10000 Depreciation on plant A a/c10000 (Depreciation has been transferred into accumulated depreciation) 0/01/1900Accumulated depreciation a/c70000 Depreciation on plant B a/c70000 (Depreciation has been transferred into accumulated depreciation) Que 5) Different type of liquidation: Liquidation is a process in which an organization terminates its operations. Mainly there are three ways to liquidate the organization: ï‚·Members voluntary liquidation: In this case, the company is solvent and all the creditors have been paid in full and the remaining funds of the company has been transferred to the shareholders and the directors. In this process the directors and the shareholders closes the company with huge reserve (Kaplan and Atkinson, 2015). ï‚·Creditors voluntary liquidation:
In this case, the company is insolvent and all the creditors have not been paid in full. In this process the creditors pressurise closes the company. ï‚·Court voluntary liquidation: In this case, the directors of the creditors of the company apply in the country to closes and liquidate the company (Madhura, 2014). Unrealized profits: Unrealized profit is the amount which exists on the paper in order to get from an investment. It is a profitable state for an organization that has yet to be sold and get in exchange the cash. Such as in case of transfer of assets among the company the company has not generated any profit but it has been shown in the accounting books of the company (Lord, 2007). Residual value: Residual value is the estimated in context with the fixed assets which could be got by the organization at the end of the life cycle of that particular assets. The residual value of assets depends on the nature of the asset. Residual value is one of the important aspects of an asset which impacts on the depreciation and other aspect of the company (Higgins, 2012).
References: Higgins, R. C., 2012.Analysis for financial management. McGraw-Hill/Irwin. Kaplan, R.S. and Atkinson, A.A., 2015.Advanced management accounting. PHI Learning. Lord, B.R., 2007. Strategic management accounting.Issues in Management Accounting,3. Madura, J. 2014.Financial Markets and Institutions. Cengage Learning.