ACC322 Project Report: Company Accounting Analysis

This project report addresses a comprehensive company accounting assignment, encompassing three key areas: tax effect accounting, business combinations, and consolidation. The tax effect accounting section includes calculations for profit for tax, tax liabilities, and journal entries related to current and deferred tax. The business combinations section covers the acquisition of net assets, journal entries for the acquisition, and an explanation of financial consolidation processes. This includes the collection and consolidation of data, and the process of consolidation in business combinations. Finally, the consolidation section analyzes goodwill, including carrying values, fair value adjustments, and acquisition analysis, with detailed journal entries and a consolidation worksheet to illustrate the combined financial statements. The report offers a thorough analysis and provides a clear understanding of the accounting principles involved in each area.

Running Head: Company Accounting
1
Project Report: Company Accounting

Company Accounting
2
Question 1: Tax effect Accounting
Part a:
Particulars (Amount in $)
Profit $ 400,493
Add: Depreciation
Depreciation- Building $ 8,000
Depreciation- Plant $ 50,000
Depreciation- Motor Vehicle $ 55,000
Total $ 113,000
Less: Depreciation as per tax
Depreciation- Building (assumed because it is
not mentioned in question) $ 8,000
Depreciation-Plant $ 75,000
Depreciation-Motor Vehicle $ 33,000
Total $ 116,000
Profit for tax $ 397,493
tax $ 119,248
tax already paid
28 July 2018 (final payment for 30 June
2018)$22500 $ 22,500
28 October (first payment for 30
june2019)$31420 $ 31,420
28 February(second payment for 30 June
2019)$30380 $ 30,800
28 April (third payment for 30 June
2019)$31750 $ 31,750
total $ 116,470
net tax liability $ 2,778
if advance tax is paid than interest is to be levied accordingly on
quarterly liability hence subsequently be added in tax liability
If any other expense is disallowed as per Australian tax
authority than that will be added back in profit for tax too.
Part b:
Items
Carrying
amount
Tax
Base
Taxable
TD
Deductible
TD
Assets

Company Accounting
3
Cash 80000
Inventory 170000
Receivables 500000
Interest receivable 40000
Plant 500000 315000 55500
Land 750000 650000 30000
Motor vehicle 165000 46200 35640
Liabilities
Accounts payable 290000 87000
Loan 53770
Temporary
difference 121140 140770
Exempt difference 0 0
Net difference 121140 140770
Opening balance 29630
150770 140770
DTL 45231
DTA 42231
Adjustments 3000
Part c:
Journal Entry
Date Particulars Debit Credit
2019
Jun-30 Current Tax 2778
Provision of current tax 2778
(Expense provision created)
Jun-30 Provision of current tax 2778
Bank 2778
(At time of payment balance tax)
Jun-30 Profit and Loss a/c 9789
Deferred tax liability 9789
(Being deferred tax liability created)
Question 2: Business combinations:
Part a:

Company Accounting
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acquisition of net asset of Wilson ltd

Company Accounting
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particulars amount($)
net fair value of identifiable assets and liabilities
acquired:
add trade receivables 30000
inventory 45800
land 500000
buildings 725000
plant & equipment 106000
total 1406800
less liabilities
trade payables 44500
provision 175000
loan 600000
accrued employee benefits 13000
accrued loan interest 11250
total 843750
Net fair value 563050
consideration
transferred
shares 58800
investment transfer 534500
total 593300
goodwill 30250
Part a (B)
Journal Entry
Date Particulars Debit Credit
2019
trade receivables 30000
inventory 45800
land 500000
buildings 725000
plant & equipment 106000
Goodwill 30250
trade payables 44500
provision 175000

Company Accounting
6
loan 600000
accrued employee benefits 13000
accrued loan interest 11250
Equity Capital 58800
Investment 534500
(Adjustment done)
share capital 1700
misc expenses 2300
cash 4000
(Amount paid)
accrued expenses 762
solicitor fees 2690
cash 3452
Part b:
Financial consolidation is a process which combines the financial data of a business
entity from several sources to report the performance of an entity. There are various purposes,
for which the consolidation statements are prepared by the company. Financial consolidation
is a proper defined procedure which includes various issues and complexities. This method is
typically used in the organization when an organization buys more than 50% stock of
subsidiary organization. In case of general scenario, below is the consolidation process in an
organization:
1. Collecting the data from trial balance:
This is the basic and initial step of consolidation of financial statement of an organization.
In this, the financial data from trial balance is collected and sorted by the accountant and
recorded into the financial books of the organization such as revenue, expenses, assets,
equity, liability etc.
2. Consolidation of data:
After sorting the data, the main step of consolidation is recording the data according
to AASB rules in the financial statement books.
In case of business combinations, consolidation of 2 different business entities becomes
important as it helps the acquirer and acquires organization to make better investment

Company Accounting
7
decision. It collects the data from both the organizations and set the data in such a way that a
summarise form of both the organization could be identified along with the performance and
position of the company. The consolidation process in case of business combinations are as
follows:
1. Record intercompany loans
2. Charge corporate overhead
3. Charge payables
4. Charge payroll expenses
5. Complete adjusting entries
6. Investigate the financial performance of the company
7. Review subsidiary financial statement of the company
8. Eliminate all the intercompany transaction
9. Review parent financial statement
10. Close subsidiary books
11. Close the parent company books
12. Issue the financial statement
The main purpose of consolidation is to figure about the financial positions of
subsidiary and parent company together so that a better understanding could be made about
the financial position of the company and a better investment decision could be made. Along
with the parent and subsidiary company, it is also important for the stakeholders of both the
organizations to identify the measure the performance of the organizations so that they could
plan better strategies and make better decision about the investment and divestment from the
business (AASB, 2019).
Consolidation financial statement makes it easier for the organization to make a control
over the business and operate all the functions and operations of the business effectively. It
also helps the businesses to figure out the actual profit made through eliminating all the intra
business transaction of the business and recording the proper financial performance of the
business.

Company Accounting
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Question 3: Consolidation
Part a:
Recorded Goodwill:
Goodwill 70,000
Carrying Value of Goodwill 70,000
Fair Value Adjustments:
Inventory (950000-900000)*(1-
30%) 35,000
Plant (2340000-2210000)*(1-30%) 91,000
Land (1600000-1400000)*(1-30%) 140,000
Equipment Design 12000*(1-30%) 8,400
Goodwill (70,000)
Total after tax fair value
adjustment 204,400
Acquisition Analysis:
Net Fair value of identifiable assets
(1750000+900000+87500-75000) 3,275,000
Add: Fair Value Adjustments 204,400
Fair Value of Net Identifiable
Assets 3,479,400
Consideration transferred 3,120,000
Value of goodwill on purchase 3,120,000
Fair Value of business 4,263,000
Net Fair value of identifiable assets 3,479,400
Value of Goodwill 783,600
Carrying amount of goodwill 70,000

Company Accounting
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Unrecorded Goodwill 713,600
Goodwill Acquired 3,120,000
Goodwill of the target company 783,600
Control Premium
2,336,400
Part b:
1-Jul-16 Retained Earnings 1602500
Share Capital 1750000 1602500
Reserves 900000
Other Equities 10500
Loan from Mason Limited 20000
Goodwill 0
Shares in Mason Limited 4283000
Part c:
30-Jun-
17 Retained Earnings 1602500
Share Capital 3120000
Reserves 900000
Other Equities 10500
Loan from Mason Limited 77000
Loan to Mason Limited 20000
Shares in Mason Limited 5710000
Part d:
Johnson Limited
Journal

Company Accounting
10
Date General Journal Debit Credit
Business
Combinatio
n entry:
Machinery 471250
Deferred tax Liability 36250
Business combination valuation
reserve 435000
Amortisation expense 15000
Retained earnings 21250
Accumulated Amortisation 36250
Deferred tax liability 10875
Income tax expense 3262.5
Retained Earnings 7612.5
Depreciation expense 15000
Gain on sale of machinery 21250
Retained earnings 7612.5
Income tax expense 3262.5
Transfer from BCVR 40600
Accumulated Impairment loss -
Goodwill 77000
Goodwill 77000
Goodwill 77000
BCVR 77000
Part e:
Journal Entries
30-Jun Deferred tax assets 50000
Inventory 50000

Company Accounting
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30-Jun Deferred tax assets 200000
Land 200000
30-Jun Plant 130000
Deferred tax liability 130000
30-Jun Accumulated impairment losses 312000
Goodwill 312000
Part f:
Consolidation worksheet
Adjustments GROUP
Particulars Johnson
Limited
Mason
Limited
Dr Cr
Revenues 4200000 1400000 5600000
Expenses 1750000 490000 2240000
2450000 910000 3360000
Gain on sale of non current
A
21250 0 21250
Profit before tax 2485000 892500 3381250
Tax expense 700000 350000 3262.
5
1053263
Profit 1785000 542500 2327988
Retained Earnings
(1/7/18) 3500000 1200000 7612.
5
4687878
4510
Transfer from BCVR - - 40600 77000 0
77000 40600
5285000 1742500 7015865
Dividend paid 300000 60000 360000
Transfer to General Reserve 0 900000 1500 901500

Company Accounting
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300000 960000 1261500
Retained Earnings
(30/06/2019) 4585000 1602500 5754365
Share capital 14000000 1750000 13000 1573700
0
General Reserve 900000 5000 891500
other component of entity 35000 10500 3500 38950
Business combination 3050 840 2100
valuation reserve 480 100
490
18620000 4263000 2242391
5
Shares in Mason Limited 312000 0 24600 287400
Land 5340000 1400000 6740000
Cash 92500 87500 180000
Inventory 2100000 985000 3085000
Plant and Machinery 11466000 4079000 1554500
0
Accum Depreciation -3276000 -1944000 -5220000
Total 16034500 4607500 15801
5
14513
0
20617400
Question 4: Non controlling interest:
Part a:
Recorded Goodwill:
Goodwill 75,000
Carrying Value of Goodwill 75,000
Fair Value Adjustments:
Inventory (50000-45000)*(1-30%) 3,500
Plant (220000-200000)*(1-30%)

Company Accounting
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14,000
Goodwill (75,000)
Total after tax fair value adjustment (57,500)
Acquisition Analysis:
Net Fair value of identifiable assets
(300000+50000+90000) 440,000
Add: Fair Value Adjustments (57,500)
Fair Value of Net Identifiable Assets 382,500
Consideration transferred 430,000
Value of goodwill on purchase 430,000
Fair Value of business 571,000
Net Fair value of identifiable assets 382,500
Value of Goodwill 188,500
Carrying amount of goodwill 75,000
Unrecorded Goodwill 113,500
Goodwill Acquired 430,000
Goodwill of the target company 188,500
Control Premium 241,500
Part b:
Recorded Goodwill:
Goodwill 430,000
Carrying Value of Goodwill 430,000

Company Accounting
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Fair Value Adjustments:
Inventory (50000-45000)*(1-
30%) 3,500
Plant (220000-200000)*(1-30%) 14,000
Goodwill (430,000)
Total after tax fair value
adjustment (412,500)
Acquisition Analysis:
Net Fair value of identifiable
assets (300000+50000+90000) 440,000
Add: Fair Value Adjustments (412,500)
Fair Value of Net Identifiable
Assets 27,500
Consideration transferred 430,000
Value of goodwill on purchase 430,000
Fair Value of business 571,000
Net Fair value of identifiable
assets 27,500
Value of Goodwill 543,500
Carrying amount of goodwill 430,000
Unrecorded Goodwill 113,500
Goodwill Acquired 430,000
Goodwill of the target company 543,500
Control Premium (113,500)
Part c:
Anderson Limited
Journal
Date General Journal Debit Credit
31/12/2018 Goodwill 543500

Company Accounting
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Assets 440000
Liability 113500
Cash 440000
Non controlling assets 430000
Part d:
Anderson Limited
Journal
Date General Journal Debit Credit
31/12/2016 Inventory 3500
Plant 14000
Net fair value of identifiable
assets 440,000
Goodwill 430,000
Purchase consideration 27,500
NCI
Share of
changes
in equity
2017:
NCI Share of profit 440,000
NCI 440,000
NCI 88,000
Dividend Paid 88,000
NCI 88,000
Dividend Declared 88,000
Transfer from Reserve

Company Accounting
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176,000
Transfer to Retained
Earnings 176,000
Share Capital 176,000
Other reserves - Bonus issue 176,000
Movement in Fair Value 176,000
NCI 176,000
Transfer from BCVR 176,000
BCVR 176,000
Part e:
Consolidation worksheet
Adjustments GROUP
Particulars
Anderson
Limited
Trinity
Limited Dr Cr
Revenues 80000 20000 100000
Expenses 20000 8000 28000
60000 12000 72000
Gain on sale of non current
A 16125 0 16125
Profit before tax 62000 11000 88125
Tax expense 17000 3500 1500 22000
Profit 45000 7500 66125
Retained Earnings
(1/7/18) 200000 160000 176000 184000
Transfer from BCVR 176000 - 176000 77000 135400
77000 40600
245000 167500 250125
Dividend paid 40000 8000 48000
Transfer to General 0 80000 4500 84500

Company Accounting
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Reserve
40000 88000 132500
Asset revaluation
(30/06/2019) 64000 28000 117625
Share capital 800000 300000 1100000
General Reserve 80000 5000 75000
Business combination 176000 430000 0
valuation reserve 430000 176000
864000 408000 1292625
Shares in Trinity Limited 430000 0 24600 405400
Land 300000 221000 521000
Cash 10000 7000 17000
Inventory 95000 80000 175000
Plant and Machinery 600000 500000 1100000
Accum Depreciation -306000 -300000 -606000
Total 1129000 508000 1041500 752700 1612400
Part f:
Consolidated Statement of the Profit and loss and other
Comprehensive income
For the year ended 31st Dec 2018
Revenues 100000
Expenses 28000
Profit for period 72000
Profit before tax 72000
Income tax expense 22000
Profit for the period 50000
Other comprehensive income
Gain on revaluation of assets 16125
Comprehensive income 66125
Anderson Limited
Consolidated Statement of Changes in Equity
For the year ending 31st Dec 2018

Company Accounting
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Comprehensive income for the period 66125
Retained Earnings 184000
Profit for the period 50000
Less: Dividend paid -48000
Closing Retained Earnings 186000
Share Capital 1100000
Share capital at the end 1100000
General Reserve 75000
Closing General Reserve 75000
X Limited
Consolidated Statement of Financial position
As at 31st Dec 2018
Current Assets 192000
Cash 17000
Financial assets 0
Inventories 175000
Non Current Assets
Land 521000
Plant and Machinery 0 1100000
Accumulated
Depreciation 0 -606000
Goodwill 543500
Intangibles 1200
Total Non Current Assets 1559700
Total Assets 1751700
Equity
Share capital 1100000
Retained Earnings 186000
General Reserve 75000
Total Equity 1361000
Liabilities
Current Liabilities
Payables 8000
Provisions 357700
Total Current Liabilities 365700

Company Accounting
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Non-Current Liabilities
Deferred Tax Liability 25000
Total Liabilities 390700
Total Equity and Liabilities 1751700

Company Accounting
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References:
AASB. (2019). Federal Register of Legislation. (online). Retrieved from:
https://www.legislation.gov.au/Details/F2018C00317