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Financial Accounting | Document

   

Added on  2020-04-01

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Running head: FINANCIAL ACCOUNTING 2Financial AccountingName of the Student:Name of the University:Author’s Note:

1FINANCIAL ACCOUNTING 2Answer to Question 1:Acquisition Analysis:ParticularsCarryingAmountFair ValueNet Fair ValueShare Capital$200,000 Retained Earnings$74,000General Reserve$6,000Plant$100,000 $110,000 $10,000Land$60,000$76,000$16,000Net Fair Value of Identifiable Assets & LiabilitiesA$306,000 Consideration TransferredB$263,200 Add: Non-ControllingInterestC$63,000Total Purchase ConsiderationD=B+C$326,200 Goodwill AcquiredE=A-D$20,200 Fair Value of Subsidiary Ltd.F=C/20%$315,000 Goodwill of Subsidiary Ltd.G=F-A$9,000 Less: Recorded GoodwillH$0 Unrecorded GoodwillI=G-H$9,000 Goodwill of Parent Ltd.- Control PremiumJ=E-G$11,200

2FINANCIAL ACCOUNTING 2In the books of Parent Ltd.Journal EntriesDr.Cr.DateParticularsAmountAmountBusiness Combination Entries:Retained Earnings (1/7/16) A/c.Dr.$16,000To,Deferred Tax LiabilityA/c.$4,800To,Transfer from BCVR A/c.$11,200Accumulated Depreciation- Plant A/c.Dr.50000To,Plant A/c.40000To,Deferred Tax LiabilityA/c.3000To,Business CombinationValuation Reserve A/c.7000Depreciation Expenses A/c.Dr.1000To,AccumulatedDepreciation- Plant A/c.1000Deferred Tax Liability A/c.Dr.300To,Income Tax ExpensesA/c.300Goodwill A/c.Dr.$9,000To,Business CombinationValuation Reserve A/c.$9,000Pre-Acquisition Entries:1/7/2014Share Capital A/c.Dr.$160,000Retained Earnings (1/7/14) A/c.Dr.$59,200General Reserve (1/7/14) A/c.Dr.$4,800Goodwill A/c.Dr.$11,200Business Combination Valuation Reserve A/c.Dr.$28,000

3FINANCIAL ACCOUNTING 2To,Shares in Subsidiary Ltd. A/c.$263,2001/7/2016Share Capital A/c.Dr.$160,000Retained Earnings (1/7/16) A/c.Dr.$64,800General Reserve (1/7/16) A/c.Dr.$5,440Goodwill A/c.Dr.$11,200Business Combination Valuation Reserve A/c.Dr.$21,760To,Shares in Subsidiary Ltd. A/c.$263,200Transfer from BCVR A/c.Dr.$8,960To,Business CombinationValuation Reserve A/c.$8,960NCI Share of Equity:1/7/2014Share Capital A/c.Dr.$40,000Retained Earnings (1/7/14) A/c.Dr.$14,800General Reserve (1/7/14) A/c.Dr.$1,200Business Combination Valuation Reserve A/c.Dr.$7,000To,NCI A/c.$63,000NCI Share of Changes in Equity:General Reserve A/c.Dr.$160Other Components of Equity A/c.Dr.$3,200To,Business CombinationValuation Reserve A/c.2240To,NCI A/c.$1,120Interim Dividend Paid:Dividend from Subsidiary A/c.Dr.16000To,Interim Dividend Paid A/c.16000NCI A/c.Dr.4000To,Interim Dividend Paid A/c.4000

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