Corporate Accounting

This document provides study material and solved assignments on Corporate Accounting. It includes journal entries, tax worksheets, acquisition analysis, goodwill calculation, consolidated worksheet, and more.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1CORPORATE ACCOUNTING
Table of Contents
Question 1:.......................................................................................................................................2
Journal entry:...................................................................................................................................2
Tax worksheet:.................................................................................................................................2
Net balance:.....................................................................................................................................2
Journal entries:.................................................................................................................................3
Question 2A:....................................................................................................................................3
Acquisition analysis:........................................................................................................................3
Journal entries:.................................................................................................................................4
Question 2B:....................................................................................................................................4
Question 3:.......................................................................................................................................6
Goodwill calculation:.......................................................................................................................6
Journal entries:.................................................................................................................................6
Journal entries..................................................................................................................................7
Consolidated worksheet:..................................................................................................................8
Question 4:.....................................................................................................................................12
Bargaining purchase:.....................................................................................................................12
Partial goodwill:.............................................................................................................................13
Journals:.........................................................................................................................................13
Financial statements:.....................................................................................................................16
References:....................................................................................................................................19

2CORPORATE ACCOUNTING
Question 1:
Journal entry:
Particulars Debit Credit
Income Tax demanded on a/c of
disawollance 1620
To current tax payable 1620
Tax worksheet:
Calculation of Current Tax
Add/Less Particular Amount
Profit as per books 92,550
Add carrying amount of plant sold 30,000
Less carrying amount of plant sold (tax Purpose) -26000
Add Accounting Fees not performed 4950
Add depreciation of Equipment and Plant as per books 29,500
Less depreciation of Equipment and Plant as per Tax purpose -35800
Less Insurance claim in process -41200
Add Entertainment Tax disallowed 13,200
Add Amortized development cost 15,000
Less Government Grant (exempt) -2,200
Less 125% of development Expense incurred -56250
Add Goodwill Impairment 2,000
Taxable Profit 25,750
Current Tax @ 30% 7725
Net balance:
Treatment of different item on Differed Tax Amount Tax effect DTA/DTL
Reversal of Differed Tax asset in respect to tax loss 17000 5100 DTL
Difference In Depreciation of Plant & Equipment 1890 DTL

3CORPORATE ACCOUNTING
6,300
Accounting Fees against work not performed 4950 1485 DTA
Insurance Claim under process 41200 12360 DTL
Development Cost 30000 9000 DTL
Land for Increase in FV 150000 45000 DTL
Difference in Provision for Doubtful Debt 200 60 DTA
Difference in Provision for Employees Benefit 4400 1320 DTA
Difference in Provision for Warranties 900 270 DTL
Journal entries:
Particulars Debit Credit
Deferred tax asset 7725
Income tax expense 7725
Particulars Debit Credit
Current tax
liabilities 7725
Deferred tax asset 7725
Question 2A:
Acquisition analysis:
Particulars Debit Credit
Trade receivables 46,800
Inventory 28,000
Plant
1,12,00
0
Land 35,800
Scuby snaks 10,000
Business purchase 2,26,200
Gain on bargain purchase 6,400
acquisition of shares in Scruggy Ltd

4CORPORATE ACCOUNTING
Journal entries:
Particulars Debit Credit
Artworks 18000
Profit on revaluation 18000
Question 2B:
Business combination:
According to “AASB 3 Business Combinations”, business combination could be defined
in the form of a transaction or other event where an acquirer gains control of one or more
companies (Aasb.gov.au 2019). Control could be defined as the power in governing operating
and financial policies of an organisation for deriving benefits from activities. Thus, when a
purchaser obtains control over other business through a transaction, it is termed as business
combination.
Important aspects in AASB 3’s definition of business combination:
There are three significant aspects of AASB 3’s definition related to business combination,
which are summarised as follows:
 The target organisation needs to be a business having processes and inputs, which could
be converted into those outputs that are recognisable.
 The transaction occurs at the time an acquirer is involved in transferring an amount,
which is called consideration, as equities, cash or liabilities for buying the target (Kieso,
Weygandt and Warfield 2016).

5CORPORATE ACCOUNTING
 In order to gain control of the business, the acquirer needs to have above 50% stake of
ownership in the business.
Different forms of a business combination:
In accordance with AASB 3, business combinations are of five general types and they are
elucidated briefly as follows:
 X Limited has made acquisition of all the assets of Y Limited, while Y Limited is
continuing and at present, it is involved in holding shares in X Limited.
 X Limited has made acquisition of all liabilities and assets of Y Limited and there is
eventual liquidation of Y Limited.
 Z Limited is developed for acquiring all liabilities and assets of X Limited and Y
Limited, while there has been liquidation of X Limited and Y Limited (Paugam, Astolfi
and Ramond 2015).
 X Limited has made acquisition of a sub-group of assets of Y Limited like a product line
making up a business, while there are no changes in the business operations of Y
Limited.
 Shares are purchased by X Limited in Y Limited in order to gain control over Y Limited.
However, Y Limited is involved in continuing its business operations and now, it has
been a subsidiary of X Limited.

6CORPORATE ACCOUNTING
Question 3:
Goodwill calculation:
Particulars Value
Share capital 2,00,000
General reserve 25,000
Retained earnings 45,000
Dividend payable 10,000
Provisions 2,06,500
Fair value 5,34,500
Acquisition amount 5,59,500
3,20,000
Plant (cost $300,000) 186000 190000 4000
Trademark 1,00,000 1,10,000 10000
Inventory 70,000 80,000 10000
Equipment (cost
$80,000) 50,000 53,000 3000
Land 50,000 70,000 20000
Machinery (cost $18,000) 15,000 16,000 1000
Fittings (cost $15,000) 10,000 10,000 0
Goodwill 25,000 48000
Journal entries:
Pre-acquisitions entries
Particulars Debit Credit
Asset revaluation 48000
Retained earnings 45,000
Share capital 2,00,000
General reserve 25,000
Provisions 2,06,500
Dividend payable 10,000
Goodwill 25,000

7CORPORATE ACCOUNTING
Shares in Fish Ltd 5,59,500
Particulars Debit Credit
Brands 17,000
BCV reserve 11,900
Deferred tax liability 5,100
Particulars Debit Credit
Impairment valuation 5,000
Goodwill 5,000
Particulars Debit Credit
Goodwill 25,000
BCV reserve 25,000
Journal entries
BCV entries BCV entries
Particulars Debit Credit Particulars Debit Credit
Inventory 4,000 Inventory 6,000
Income tax expense 1,200 Income tax expense 1,800
Retained earnings 2,800 Retained earnings 4,200
Transfer from BCV
reserve 5,600
Transfer from BCV
reserve 8,400
BCV entries BCV entries
Particulars Debit Credit Particulars Debit Credit
Depreciation expense 1,000 Depreciation expense 200
Sale of Plant (Gain) 5,000 Sale of furniture (Gain) 1,000
Income tax expense 1,800 Income tax expense 360

8CORPORATE ACCOUNTING
Retained earnings 2,800 Retained earnings 560
Transfer from BCV
reserve 7,000
Transfer from BCV
reserve 1,400
BCV entries
BCV entries Particulars Debit Credit
Particulars Debit Credit Inventory 9,000
Interim dividend 5,000 Income tax expense 2,700
Transfer from BCV
reserve 5,000 Retained earnings 6,300
Transfer from BCV
reserve 12,600
BCV entries
Particulars Debit Credit BCV entries
Inventory 1,800 Particulars Debit Credit
Income tax expense 540 Depreciation expense 2,000
Retained earnings 1,260 Sale of furniture (Gain) 10,000
Transfer from BCV
reserve 2,520 Income tax expense 3,600
Retained earnings 5,600
Transfer from BCV
reserve 14,000
Consolidated worksheet:
Particulars
Cat Lt
d
Fish Lt
d
Adjustments
Debit Credit Group
Revenue
$
2,20,000
.00
$
1,82,000
.00
$
1,800.00
$
19,000.00
$
4,19,200
.00
Other income
$
84,000.0
0
$
30,000.0
0
$
1,14,000
.00

9CORPORATE ACCOUNTING
Expenses
$
1,62,000
.00
$
1,28,000
.00
$
2,90,000
.00
Trading profit
$
58,000.0
0
$
54,000.0
0
$
1,29,200
.00
Gains/losses on sale of
non-current assets
$
50,000.0
0
$
80,000.0
0
$
1,30,000
.00
Profit before Tax
$
1,08,000
.00
$
1,34,000
.00
$
2,59,200
.00
Tax Expenses
$
20,000.0
0
$
18,000.0
0
$
38,000.0
0
Other expenses
$
53,000.0
0
$
31,000.0
0
$
84,000.0
0
Profit
$
88,000.0
0
$
1,16,000
.00
$
2,21,200
.00
Retained earnings
(1/7/18)
$
30,000.0
0
$
45,000.0
0
$
16,100.00
$
7,420.00
$
66,320.0
0
Transfer from BCVR
$
-
$
-
$
-
Final dividend declared
$
6,000.00
$
4,000.00
$
10,000.0
0
Interim dividend paid
$
12,000.0
0
$
5,000.00
$
17,000.0
0
T'fer to gen reserve
$
-
Retained Earnings
(30/6/19)
$
1,12,000
.00
$
1,57,000
.00
$
2,60,520
.00
Share Capital
$
3,12,000
.00
$
2,00,000
.00
$
5,12,000
.00
General reserve
$
20,000.0
0
$
25,000.0
0
$
25,000.00
$
20,000.0
0
BCVR
$
-
$
-
$
42,920.00
$
62,900.00
$
19,980.0
0

10CORPORATE ACCOUNTING
$
4,44,000
.00
$
3,82,000
.00
$
8,12,500
.00
Asset Revaluation
Surplus (1/7/18)
$
-
$
5,000.00
$
5,000.00
Gains/Losses
$
48,000.00
$ -
48,000.0
0
Asset Revaluation
Surplus (30/6/19)
$
-
$
5,000.00
$ -
43,000.0
0
Total Equity
$
4,44,000
.00
$
3,87,000
.00
$
7,69,500
.00
Provisions
$
50,000.0
0
$
1,08,500
.00
$
2,06,500.00
$ -
48,000.0
0
Final dividend payable
$
6,000.00
$
4,000.00
$
10,000.0
0
Loan from Cat Ltd
$
12,000.0
0
$
12,000.0
0
Current tax liabilities
$
8,000.00
$
2,500.00
$
10,500.0
0
Defer.tax liabilities
$
20,000.0
0
$
11,000.0
0
$
31,000.0
0
Total Liabilities
$
84,000.0
0
$
1,38,000
.00
$
15,500.0
0
Total Equity &
Liabilities
$
5,28,000
.00
$
5,25,000
.00
$
7,85,000
.00
Shares in Fish Ltd
$
3,20,000
.00
$
-
$
2,39,500.00
$
80,500.0
0
Inventory
$
23,000.0
0
$
20,000.0
0
$
43,000.0
0
Receivables
$
6,000.00
$
5,000.00
$
11,000.0
0
Cash $
9,800.00
$
43,000.0
$
52,800.0

11CORPORATE ACCOUNTING
0 0
Plant
$
2,03,000
.00
$
3,24,000
.00
$
5,27,000
.00
Equipment
$
53,000.0
0
$
80,000.0
0
$
1,33,000
.00
Land
$
25,000.0
0
$
50,000.0
0
$
75,000.0
0
Furniture
$
7,000.00
$
8,000.00
$
15,000.0
0
Trademark
$
-
$
1,00,000
.00
$
1,00,000
.00
Motor vehicle
$
10,000.0
0
$
20,000.0
0
$
30,000.0
0
Fittings
$
-
$
15,000.0
0
$
15,000.0
0
Machinery
$
15,000.0
0
$
15,000.0
0
$
30,000.0
0
Deferred tax assets
$
10,200.0
0
$
20,000.0
0
$
30,200.0
0
Accumulated
depreciation – plant
$ -
1,14,000
.00
$ -
1,38,000
.00
$ -
2,52,000
.00
Accumulated
depreciation –
Machinery
$ -
1,000.00
$ -
3,000.00
$ -
4,000.00
Accumulated
depreciation – furniture
$ -
1,000.00
$ -
2,000.00
$ -
3,000.00
Accumulated
depreciation – fittings
$
-
$
-
$
-
Accumulated
depreciation –
equipment
$ -
30,000.0
0
$ -
50,000.0
0
$ -
80,000.0
0
Accumulated
depreciation – vehicles
$ -
1,000.00
$ -
6,000.00
$ -
7,000.00
Loan to Fish Ltd
$
12,000.0
0
$
-
$
12,000.00
$
-

12CORPORATE ACCOUNTING
Brand
$
-
$
-
$
11,500.00
$ -
11,500.0
0
Goodwill
$
-
$
25,000.0
0
$
25,000.00
$
-
Total Assets
$
5,47,000
.00
$
5,26,000
.00
$
7,85,000
.00
Question 4:
Bargaining purchase:
Carrying amount
Fair
value
net
value
75%
controlling
25% non-
controlling
Inventor
y 75,000 1,00,000
25,00
0 18,750 6,250
Plant
(cost
$170,00
0) 1,50,000 1,90,000
40,00
0 30,000 10,000
Land 60,000 1,00,000
40,00
0 30,000 10,000
Particu
lars Value
75%
controlli
ng 25% non-controlling
Share
capital 1,00,000 75,000
25,00
0
General
reserve 60,000 45,000
15,00
0
Retaine
d
earnings 40,000 30,000
10,00
0
Total

13CORPORATE ACCOUNTING
Fair
value of
assets 2,28,750
Purchas
e price 2,60,000
Goodwi
ll 32,100
Partial goodwill:
Total Fair value of
assets 2,28,750
Purchase price 2,60,000
Goodwill Partial 31,250
Journals:
Pre-acquisitions entries
Particulars Debit Credit
Retained earnings (1/7/18) 30,000
Share capital 75,000
General reserve 45,000
BCV reserve 78,750
Goodwill 31,250
Shares in Frank Ltd 2,60,000
Particulars Debit Credit
Transfer from BCV reserve 5,600
BCV reserve 5,600
Statement of changes in equity for the year ended 2013
Retained earnings
Non controlling
interest

14CORPORATE ACCOUNTING
Balance at 1 January 20X6 - -
Total comprehensive income for the year 26,250 8,750
Balance at 31 December 20X6 26,250 8,750
Statement of changes in equity for the year ended 2018
Retained earnings
Non controlling
interest
Balance at 1 January 20X6 26,250 8,750
Total comprehensive income for the year - -
Balance at 31 December 20X6 26,250 8,750
Statement of changes in equity for the year ended 2019
Retained earnings
Non controlling
interest
Balance at 1 January 20X6 1,76,250 18,750
Total comprehensive income for the year 3,52,400 -
Balance at 31 December 20X6 5,28,650 18,750
Particulars High Ltd Low Ltd
Adjustments
Debit Credit Group
Sales revenue
$
5,10,600.00
$
89,000.00
$
4,000.00
$
6,03,600.
00
Cost of sales
$
2,25,000.00
$
32,000.00
$
2,57,000.
00
Trading profit
$
2,85,600.00
$
57,000.00
$
3,46,600.
00
Other expenses
$
65,000.00
$
8,000.00
$
73,000.00
Profit before Tax
$
3,50,600.00
$
65,000.00
$
2,73,600.
00
Tax Expenses
$
50,000.00
$
16,000.00
$
1,200.00
$
67,200.00

15CORPORATE ACCOUNTING
Profit
$
3,00,600.00
$
49,000.00
$
2,06,400.
00
Retained Earnings
(1/7/18)
$
1,20,000.00
$
75,000.00
$
2,800.00
$
1,97,800.
00
Transfer from BCVR
$
-
$
-
$
5,600.00
$ -
5,600.00
T'fer to gen reserve
$
-
Retained Earnings
(30/6/19)
$
4,20,600.00
$
1,24,000.
00
$
3,98,600.
00
Share Capital
$
4,00,000.00
$
1,00,000.
00
$
5,00,000.
00
General reserve
$
60,000.00
$
80,000.00
$
1,40,000.
00
BCVR
$
-
$
-
$
31,250.0
0
$
31,250.00
$
8,80,600.00
$
3,04,000.
00
$
10,69,850
.00
Asset Revaluation
Surplus (1/7/18)
$
-
Gains/Losses
$
-
Asset Revaluation
Surplus (30/6/19)
$
-
$
-
$
-
Total Equity
$
8,80,600.00
$
3,04,000.
00
$
10,69,850
.00
Trade payables
$
82,900.00
$
12,000.00
$
94,900.00
$
-
$
-
Total Liabilities
$
82,900.00
$
12,000.00
$
94,900.00
Total Equity &
Liabilities
$
9,63,500.00
$
3,16,000.
00
$
11,64,750
.00

16CORPORATE ACCOUNTING
Shares in Low Ltd
$
2,60,000.00
$
-
$
2,60,000.
00
Current assets
$
1,62,000.00
$
74,000.00
$
2,36,000.
00
$
-
Land
$
1,10,000.00
$
60,000.00
$
1,70,000.
00
Plant
$
4,25,500.00
$
1,90,000.
00
$
6,15,500.
00
Accumulated
depreciation - plant
$ -
1,24,000.00
$ -
24,000.00
$ -
1,48,000.
00
$
-
Goodwill
$
-
$
-
$
31,250.00
$
31,250.00
Total Assets
$
8,33,500.00
$
3,00,000.
00
$
11,64,750
.00
Financial statements:
Consolidated Balance Sheet:
Particulars Amount
Current Assets:
Current assets $ 2,36,000.00
Receivables $ -
Total Current Assets $ 2,36,000.00
Non-Current Assets:
Plant $ 6,15,500.00
Accum. Depreciation $ -1,48,000.00
Land $ 1,70,000.00
Shares in Low Ltd
$
2,60,000.00
Goodwill $ 31,250.00

17CORPORATE ACCOUNTING
Total Non-Current Assets $ 9,28,750.00
Total Assets $ 11,64,750.00
Current Liabilities:
Trade payables $ 94,900.00
0 $ -
Total Current Liabilities $ 94,900.00
Non-Current Liabilities:
0 $ -
Total Non-Current
Liabilities $ -
Total Liabilities $ 94,900.00
Equity:
Share Capital $ 5,31,250.00
Asset Revaluation Surplus $ 1,40,000.00
Retained Earnings $ 3,98,600.00
Non-controlling interest
Total Equity $ 10,69,850.00
Total Liabilities and Equity $ 11,64,750.00
Consolidated Income Statement:-
Particulars Amount
Revenue $ 6,03,600.00
Expenses $ 2,57,000.00
Operating Profit $ 3,46,600.00
Profit on Non-Current Assets $ 73,000.00
Profit before Tax $ 4,19,600.00
Income Tax Expenses $ 67,200.00
Net Profit before tax $ 3,52,400.00
Gain on revaluation of assets
Comprehensive income for the period $ 3,52,400.00
Consolidated change in equity-
Comprehensive income for the period $ 3,52,400.00
Retained Earnings (1/7/18) $ 1,97,800.00
Profit for the period $ 2,06,400.00
0 $ -

18CORPORATE ACCOUNTING
Retained Earnings (30/6/19) $ 4,04,200.00
Share capital balance at 1 July 2018 $ 4,00,000.00
Share capital balance at 30 June 2019 $ 4,00,000.00
General reserve at 1 July 2018 $ 60,000.00
General reserve at 30 June 2019 $ 60,000.00
Asset Revaluation Surplus (30/6/19) $ -
Gains/Losses $ -
Asset Revaluation Surplus (30/6/19) $ -

19CORPORATE ACCOUNTING
References:
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB3_08-15.pdf [Accessed 9 May 2019].
Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2016. Intermediate Accounting, Binder Ready
Version. John Wiley & Sons.
Paugam, L., Astolfi, P. and Ramond, O., 2015. Accounting for business combinations: Do
purchase price allocations matter?. Journal of Accounting and Public Policy, 34(4), pp.362-391.