Tassie Ltd Journal Entries

This assignment presents journal entries for Tassie Ltd, focusing on transactions related to plant & equipment purchases (FOB shipping terms), foreign currency exchange losses, and vendor payments. The entries span two financial years, 30 June 2017 and 30 June 2018, providing a comprehensive view of the company's financial activities during this period.

Solution – 1
Parent limited acquired 80% stake in subsidiary limited and remaining 20% is with other
shareholders, denominated as non-controlling interest. The accounting for these
transactions involves following steps:
STEP 1 is to prepare the acquisition analysis and find out the goodwill generated due to
acquisition.
Nate fair value of assets acquired during
acquisition
Share Capital $ 200,000.00
Retained Earnings $ 74,000.00
Revaluation surplus $ 6,000.00
Fair value:
- Plant ((110000-100000)*(1-30%)) $ 7,000.00
- Land ((76000-60000)*(1-30%)) $ 11,200.00 $ 298,200.00
Consideration transferred $ 263,200.00
NCI's share $ 63,000.00
Aggregate value of Subsidiary $ 326,200.00
Calculation of goodwill generated
Goodwill on acquisition = $ 28,000.00
Fair value of Subsidiary Ltd. = 63000/20%
Fair value of Subsidiary Ltd. = $ 315,000.00
Fair value of net assets = $ 298,200.00
Goodwill of Subsidiary Ltd. = $ 16,800.00
Goodwill acquired = $ 28,000.00
Less: Goodwill of Subsidiary Ltd. = $ 16,800.00
Goodwill of Parent Ltd. - Control Premium = $ 11,200.00
Next Step-2 is to finalize the business combination valuation entries, which are as below:
1. Business Combination Valuation Entries
Particulars Debit Credit
Accumulated Depreciation
$
50,000.00
Plant
$
40,000.00
Deferred tax liability
$
3,000.00
Business Combination Valuation Reserve
$
7,000.00
(Being fair valuation of Plant)
Depreciation expense
$
1,000.00
Retained earnings (1/7/14) $

2,000.00
Accumulated Depreciation
$
3,000.00
(Being depreciation expense on above fair valuation)
Deferred tax liability
$
900.00
Income tax expense
$
300.00
Retained earnings (1/7/14)
$
600.00
(Being tax impact on depreciation)
Retained earnings (1/7/14)
$
16,000.00
Retained earnings (1/7/14) (16,000*30%)
$
4,800.00
Transfer from Business Combination Valuation Reserve
$
11,200.00
(Being sale of land in prior years)
Goodwill
$
16,800.00
Business Combination Valuation Reserve
$
16,800.00
(Being goodwill on acquisition recorded)
Transfer from Business Combination Valuation Reserve
$
11,200.00
Business Combination Valuation Reserve
$
11,200.00
(Being amount transferred)
Next Step-3 is to record pre-acquisition entry and non-controlling interest entry as on the
date of acquisition
2. Pre-Acquisition and NCI entry as on 1 July, 2014
Particulars Debit Credit
Share Capital
$
160,000.00
Retained Earnings
$
59,200.00
Revaluation Surplus
$
4,800.00
Goodwill
$
11,200.00
Business combination valuation reserve *
$
28,000.00
investment in Subsidiary Ltd. $ 263,200.00
(Being acquisition entry recorded)
* (80% X (7000 (plant)+11200 (Land)+16800

(goodwill))
Share Capital
$
40,000.00
Retained Earnings
$
14,800.00
Revaluation Surplus
$
1,200.00
Business combination valuation reserve**
$
7,000.00
Non-controlling interest
$
63,000.00
(Being NCI entry recorded)
** (20% X (7000 (plant)+11200 (Land)+16800
(goodwill))
Next Step-4 is to record pre-acquisition and non-controlling interest entry as on 30 June,
2017. The above pre-acquisition and non-controlling interest entry is affected by sale of
land.
Particulars Debit Credit
Share Capital
$
160,000.00
Retained Earnings
$
68,160.00
Revaluation Surplus
$
4,800.00
Goodwill
$
11,200.00
Business combination valuation reserve
$
19,040.00
Investment in Subsidiary Ltd. $ 263,200.00
(Being acquisition entry recorded)
Share Capital
$
40,000.00
Retained Earnings
$
17,040.00
Revaluation Surplus
$
1,200.00
Business combination valuation reserve
$
4,760.00
Non-controlling interest $ 63,000.00
(Being NCI entry recorded)
Last and final Step-5 is to record other consolidation and inter-company transactions
elimination entries.
Particulars Debit Credit
Retained earnings (1/7/14) $ 3,500.00
Income tax expense $ 1,500.00

Cost of Sales $ 5,000.00
(Being profit in opening inventory eliminated)
Sales $ 120,000.00
Cost of Sales
$
110,000.00
Inventory $ 10,000.00
(Being sale of inventory recorded)
Deferred tax asset $ 3,000.00
Income tax expense $ 3,000.00
(Being tax expense on above sale recorded)
Retained earnings (1/7/14) $ 7,000.00
Deferred tax asset $ 3,000.00
Plant $ 10,000.00
(Being sale of inventory classified as plant
recorded for prior years)
Accumulated depreciation (10,000*20%*1.5) $ 3,000.00
Depreciation expense $ 2,000.00
Retained earnings (1/7/14) $ 1,000.00
(Being depreciation on above plant recorded)
Income tax expense $ 600.00
Retained earnings (1/7/14) $ 300.00
Deferred tax asset $ 900.00
(Being income tax expense reocrded on above
depreciation)
Management and consulting fees $ 10,000.00
Manufacturing expense $ 10,000.00
(Being Management and consulting fees
eliminated)
Debentures $ 200,000.00
Debentures in Subsidiary Ltd
$
200,000.00
(Being debenture issued by subsidiary
eliminated)
Debenture interest $ 10,000.00
Financial expenses $ 10,000.00
(Being interest on above debentured eliminated)
Dividends from Subsidiary Ltd $ 24,000.00
Interim dividend paid $ 16,000.00
Final dividends declared $ 8,000.00
(Being dividend paid to Parent Ltd. eliminated)

Non-controlling interest $ 6,000.00
Interim dividend paid $ 4,000.00
Final dividends declared $ 2,000.00
(Being dividend paid to NCI recorded)
Other components of Equity ((20,000-
16,000)*20%) $ 800.00
Non-Controlling interest $ 800.00
(Being distribution of profit to NCI recorded)

Solution-2
Accounting for investments in associates includes the following steps:
Step-1 is to prepare acquisition analysis and compute goodwill:
Share Capital $ 330,000.00
Retained Earnings $ 220,000.00
General reserve $ 50,000.00
Fair value:
- Plant ((550000-500000)*(1-30%)) $ 35,000.00
- Land ((800000-600000)*(1-30%)) $ 140,000.00
Fair Value of net assets acquired as on 1 July,
2015 $ 775,000.00
Share of Rules Ltd. 25%
Fair value of net assets acquired $ 193,750.00
Consideration transferred $ 200,000.00
Goodwill $ 6,250.00
Next Step-2 is to enter the entries:
Particulars Debit Credit
Gain on revaluation of Land
Investment in Commercial Ltd. (200,000*(1-
30%)*25%) $ 35,000.00
Retained earnings (1/7/16) $ 35,000.00
Gain on revaluation of Plant
Investment in Commercial Ltd. (50,000*(1-
30%)*25%) $ 8,750.00
Retained earnings (1/7/16) $ 8,750.00
Depreciation on fair valuation of Plant
Retained earnings (1/7/16) (50,000/5*(1-30%)) $ 7,000.00
Share of profit or loss of associates and
joint ventures $ 7,000.00
Investment in Commercial Ltd. $ 14,000.00
Profit of prior years
Investment in Commercial Ltd. (410,000*25%) $ 102,500.00
Retained earnings (1/7/16) $ 102,500.00
Profit of current year
Investment in Commercial Ltd. (210,000*25%) $ 52,500.00
Share of profit or loss of associates and
joint ventures $ 52,500.00
Dividend received

Dividend Revenue (20000*30%) $ 6,000.00
Investment in Commercial Ltd. $ 6,000.00
Other comprehensive income
Investment in Commercial Ltd. (5,000*(1-30%)*25%) $ 875.00
Share of profit or loss of associates and
joint ventures $ 875.00

Solution-3
Part-1
Given Information
Date
Exchange
rate
Amount
(£)
Amount
($)
Net
gain/(loss)
11-May-
17 0.41 300,000 731,707
30-Jun-
17 0.43 300,000 697,674 34,033
02-Jul-17 0.42 300,000 714,286 (16,611)
14-Aug-
17 0.39 300,000 769,231 (54,945)
Journal entries of Tassie Ltd for the years ending 30 June
2017
Date Particulars Debit Credit
11-May-17 Inventory (300,000/0.41) $ 731,707.32
Accounts Payable $ 731,707.32
(Being inventory on FOB)
30-Jun-17 Accounts Payable $ 34,033
Unrealized forex gain $ 34,033
(Being accounts payable at fair value)
Journal entries of Tassie Ltd for the years ending 30 June
2018
Date Particulars Debit Credit
14-Aug-17 Accounts Payable $ 697,674
Loss on forex $ 71,556
To Bank $ 769,231
(Being payment to vendor and loss due to foreign
currency fluctuation)

Part-2
Journal entries of Tassie Ltd for the years ending 30 June
2017
Date Particulars Debit Credit
11-May-17 Plant & equipment (300,000/0.41) $ 731,707.32
Accounts Payable $ 731,707.32
(Being purchase of assets at FOB shipping)
30-Jun-17 Accounts Payable $ 34,032.90
To Plant & equipment $ 34,032.90
(Being valuation of asset at reporting date)
Journal entries of Tassie Ltd for the years ending 30 June
2018
Date Particulars Debit Credit
02-Jul-17 Plant & Equipment $ 16,611.30
To Accounts Payable $ 16,611.30
(Being change in valuation of asset and liability)
14-Aug-17 Accounts Payable $ 714,285.71
Loss on forex $ 54,945.05
To Bank $ 769,230.77
(Being payment to vendor and loss due to
foreign currency fluctuation)