ASSIGNMENT ABOUT THE CORPORATE ACCOUNTING.

CORPORATE ACCOUNTING 1
CORPORATE
ACCOUNTING

CORPORATE ACCOUNTING 2
Answer 1:
A
)
If Bolan dos not prepare Consolidated financial
statements, investment in Rex Ltd is to be recognised at
Cost or in accordance with AASB9
NCI calculation
Share Capital
3,
00,0
00
Retained Earnings (30/06/20)
60,2
40
3,
60,2
40
NCI - 60%
2,
16,1
44
B
)
If Bolan prepares Consolidated financial statements,
investment in Rex Ltd is to be recognised under Equity
method
Journal Entries
Dr. Cr.
Dividend A/c
8,64
0
Investment in Rex Ltd.
8,6
40
(Elimination of Dividend = 40% of (9600+12000)
Gain on Sale of Motor Vehicle A/c
2,
880.
00
Investment in Rex Ltd
2,
880
.00
(Elimination of Gain on Sale of Motor Vehicle = 40% of
(28800-21600)
Retained Earnings
576.
00
Investment in Rex Ltd
576
.00

CORPORATE ACCOUNTING 3
(Adjustment of Depreciation on Motor Vehicle =40% of
(43200*.2-4320-2880)
Tax Expense
1,
036.
80
Deferred Tax
1,
036
.80
(Tax Impact on Difference in Carrying Value of Motor
Vehicle)
Investment in Rex Ltd.
768.
00
Retained Earnings
768
.00
(Elimination of Unrealised Profit in Opening Inventor of
Rex Ltd)
Tax Expense
230.
40
Deferred Tax
230
.40
(Tax impact on Unrealised Profit in Opening Inventory)
Cost of Goods Sold
1,
536.
00
Inventory
1,
536
.00
(Elimination of Unrealised Profit in Closing Inventory of
Bolan Ltd)
Deferred Tax
460.
80
Tax Expense
460
.80
(Tax impact on Unrealised Profit in Closing Inventory
Inventory)

CORPORATE ACCOUNTING 4
NCI calculation
Share Capital
3,
00,0
00
Retained Earnings (30/06/20)
60,2
40
Add: Dividend
21,6
00
3,
81,8
40
NCI - 60%
2,
29,1
04
Answer 2:
Consolidation Worksheet Journal Entries at 30 June
2019
Retained Earnings Dr.
5,6
00
Accumulated Depreciation Cr.
5,6
00
(Dep on Plant for the year 30 June 2018)
Deferred Tax Dr.
1,6
80
Retained Earnings Cr.
1,6
80
(Reversal of Deferred Tax recognised on Plant FV)
Depreciation expense Dr.
2,8
00
Accumulated Depreciation Cr.
2,8
00
(Dep on Plant from 1 July 2018 to 31 Dec 2018)
Deferred Tax Dr.
8
40
Income Tax Expense Cr.
8
40
(Reversal of Deferred Tax recognised on Plant FV)
Retained earnings Dr. 2,6

CORPORATE ACCOUNTING 5
25
Cost of Goods Sold Cr.
2,6
25
(Elimination of Unrealised Profit in Opening Inventory)
Income Tax Expense Dr.
7
88
Deferred tax Cr.
7
88
(Reversal of Deferred Tax on Unrealised Profit in Op.
Invetory)
Dividend Paid Dr.
32,5
50
Dividend Received Cr.
32,5
50
(Elimination of Dividend)
Acquisition Analysis
Equity of Clock Ltd
Share Capital
2,80,0
00
General reserve
1,12,0
00
Retained earnings
56,0
00
a
4,48,0
00
Fair Value Adjustments
Land
22,4
00
Plant
28,0
00
Inventory
35,0
00
Accounts reveivable
-
7,000
Goodwill
-
5,600
b
72,8
00
Tax Impact on FV adjustments c=b*30%
-
21,840
Fair Value of Net Assets a+b+c
4,98,9
60
75% Shares acquired by Ormolu d
3,74,2
20

CORPORATE ACCOUNTING 6
Consideration Paid e
3,30,9
60
Gain on bargain purchase d-e
43,2
60
NCI share of equity - 25%
(a+b+c)*25
%
1,24,7
40
Business Combination Valuation Entries
Land A/c Dr.
22,4
00
Plant A/c Dr.
28,0
00
Inventory A/c Dr.
35,0
00
Accounts receivable A/c Cr.
7,0
00
Goodwill A/c Cr.
5,6
00
Deferred Tax A/c Cr.
21,8
40
Business Combination Valuation Reserve A/c Cr.
50,9
60
Pre-acquisition Entry
Share Capital A/c Dr.
2,10,0
00
General Resrve A/c Dr.
84,0
00
Retained Earnings A/c Dr.
42,0
00
Business Combination Valuation Reserve A/c Dr.
38,2
20
Investment in Clock Ltd. Cr.
3,30,9
60
Gain on Bargain Purchase Cr.
43,2
60
(For acquiring 75%)
Non-Controlling Interest
On the Acquisition Date
Fair Value of Net Assets
4,98,9
60
NCI - % 25%
1,24,7
40
Non-Controlling Interest
On 1 July 2018
Fair Value of Net Assets on 1 July 2017 4,98,9

CORPORATE ACCOUNTING 7
60
Add: Profit for the year
1,82,0
00
Less: Dividend Paid
-
11,200
Less: Dividend Declared
-
21,000
Less: Additional Depreciation on Plant
-
5,600
Add: Tax on Additional Depreciation
1,6
80
6,44,8
40
NCI - % 25%
1,61,2
10
Non-Controlling Interest
On 30 June 2019
Fair Value of Net Assets on 1 July 2018
6,44,8
40
Add: Profit for the year
2,10,0
00
Less: Additional Depreciation on Plant till 31 Dec 2018
-
2,800
Add: Tax on Additional Depreciation
8
40
Less: Dividend Paid
-
22,400
8,30,4
80
NCI - % 25%
2,07,6
20
Answer 3:
Liquidation A/c
Particulars Amou
nt Particulars Amou
nt
Land & Building
1,75
,000 Cash Proceeds from sale of assets
4,35
,400
Plant
2,80
,000
Sale of Secured Assets (Land &
Building)
2,68
,800
Accounts Receivable
68
,600 Retained Earnings
7
,000
Bank Deposit
7
,000 Accounts Payables - Discount
2
,800

CORPORATE ACCOUNTING 8
Investments
35
,000
Inventory
84
,000
Income Tax Penalty
2
,100
Debenture Interest
5
,250
Liquidator's Remuneration
17
,500
Liquidation Expenses
7
,700
Employee Payments
9
,800
Liquidation Surplus (balancing
figure)
22
,050
7,14
,000
7,14
,000
Liquidator's Statement of Receipts & Payments
Receipts
Amou
nt Payments
Amou
nt
Bank Deposit
8
,400 Income Tax Penalty
2
,100
Accounts Receivable
63
,000 Liquidator's Remuneration
17
,500
Investments
21
,000 Liquidation Expenses
7
,700
Inventory
70
,000 Debentures including interest
75
,250
Surplus from Sale of Secured
Assets (Land & Building)
1,63
,800 Bank Overdraft
56
,000
Plant & Equipment
2,73
,000 Accounts Payable
53
,200
Employee Payments
9
,800
Other Payables to Directors
33
,600
Surplus for Distribution to
Shareholders (balancing figure)
3,44
,050
5,99
,200
5,99
,200
Shareholders' Distribution A/c
Particulars Amo Particulars Amo

CORPORATE ACCOUNTING 9
unt unt
Payment to Shareholders
3,44
,050 Share Capital
3,22
,000
Liquidation Surplus
22
,050
3,44
,050
3,44
,050
Answer 4:
Non-controlling interest:
The minority interest shall be considered or be treated as the non-controlling interest. This is
the share of ownership is the equity of the subsidiary which is not owned or is not controlled
by the corporation of the parent. The parent company has the controlling interest of 50% or
less than the 100% in the subsidiary. The financial results of the parent company shall be
consolidated with the financial statements (Finance train, 2019).Then, the acquirer or the
parent would measure this interest by the way of either at the fair value as has been calculated
by the management of the acquiring company which is termed as the full goodwill method or
by the way of calculating the non-controlling interest at the appropriate share of the acquire
which is the subsidiary, of all of the net identifiable assets.
The difference between these methods is the fact that the first one goes for the recognition of
the entire amount of the goodwill which is apportioned to the subsidiary which has been
acquired whereas the second method recognises the parent’s share of the goodwill.
As per the FASB, there is a specific way in which the non-controlling interest would be
reported in the statement of financials of the company. These are as per the accounting rules
as have been laid down under SFAS 141® and SFAS 160. As per the new rules that have
been laid down under the new accounting standard, all of the assets and the liabilities of the
company that has been acquired is reported on the statement of equity of balance sheet and
that too at their respective fair values (IFRS, 2019).
Step wise approach:
The following is the step method of the same:
1. The amount of the non-controlling interest which is the fair value of the company is
calculated. This is the fair value of the non-controlling interest in the market. In order
to illustrate, if A company acquires 70% shares of B company, then 30% of the shares
of the B company shall be considered as the non-controlling interest and the same
shall be valued at their respective fair values.
2. Then an adjustment is made for the fair values. In order to illsuatrte, if the fair value
of the non-controlling interest is $3 million and the amount of the goodwill is $1
million, then the total amount shall be $4 million (ACCA global, 2019).
3. Then any amount of the pro rate income shall be attributed to the non-controlling
equity interest. As at the time of the sale, in case the company had about $ 5million,

CORPORATE ACCOUNTING 10
then any amount of the pro rate share of income for the non- controlling interest shall
be 20% of $ million which is $1 million. This amount shall be added to the above
calculated amount which comes to the total of $12 million.
4. Then any amount of the pro rate or the proportionate shares shall be deducted from
the above calculated amount. For example, if the dividends are $1 million, then the
same would be subtracted from the above fair value which is $12 million less $1
million that comes to be $ 11 million.
5. The above amounts of non-controlling interest of $11 million shall be recorded in the
statement of equity in the consolidated balance sheet of the parent company (Studocu,
2019).
Future years:
For the future years, any amount of profit earned by the company shall be apportioned in the
relevant percentages to the subsidiary company. Suppose, if the non-controlling interest is
20%, and the company after the year of acquisition earns a profit of $100 million, then the
non-controlling share in profit shall be $20 million. The same rule would be followed when
the company pays any amount of dividend to the shareholders. Suppose, if the non-
controlling interest is 20%, and the company after the year of acquisition pays a dividend of
$20 million, then the non-controlling share in profit shall be $4 million. This shall be added
to the non-controlling interest and hence, this amount will keep on increasing.

CORPORATE ACCOUNTING 11
References:
Accaglobal.com. (2019). IFRS 3 | F7 Financial Reporting | ACCA Qualification | Students |
ACCA Global. [online] Available at: https://www.accaglobal.com/in/en/student/exam-
support-resources/fundamentals-exams-study-resources/f7/technical-articles/
combinations.html [Accessed 4 Oct. 2019].
Finance Train. (2019). Calculation of Non-controlling Interest in Consolidated Financials -
Finance Train. [online] Available at: https://financetrain.com/calculation-of-non-controlling-
interest-in-consolidated-financials/ [Accessed 4 Oct. 2019].
IFRSbox - Making IFRS Easy. (2019). Example: How to Consolidate - IFRSbox - Making
IFRS Easy. [online] Available at: https://www.ifrsbox.com/consolidation-example/ [Accessed
4 Oct. 2019].
www.studocu.com. (2019). Lecture notes, lecture 7 - consolidation: non-controlling interest.
[online] Available at: https://www.studocu.com/en/document/university-of-new-south-
wales/corporate-financial-reporting-and-analysis/lecture-notes/lecture-notes-lecture-7-
consolidation-non-controlling-interest/312784/view [Accessed 4 Oct. 2019].