ACC567 Advance Financial Accounting: Consolidation Analysis

This assignment solution delves into the principles and accounting requirements for consolidation in advanced financial accounting, specifically within the context of ACC567. It addresses two main questions, the first focusing on the acquisition of Smarty Ltd by Panda Ltd, including acquisition analysis, journal entries for business combination, and depreciation adjustments. The second question examines the acquisition of Sing Song Ltd by Ping Pong Ltd, covering acquisition analysis with fair value adjustments and deferred tax implications, alongside detailed journal entries for business combination, pre-acquisition adjustments, and various transactions like sales of equipment and debentures. The solution provides detailed calculations and journal entries to illustrate the accounting treatment for each scenario, adhering to financial accounting standards. Desklib offers a wealth of similar solved assignments and past papers to aid students in their studies.

Running head: ADVANCE FINANCIAL ACCOUNTING
Advance Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

ADVANCE FINANCIAL ACCOUNTING
Table of Contents
Answer to Question 1:.....................................................................................................................2
Requirement 1:.............................................................................................................................2
Requirement 2:.............................................................................................................................2
Requirement 3:.............................................................................................................................3
Answer to Question 2:.....................................................................................................................4
Requirement 1:.............................................................................................................................4
Requirement 2:.............................................................................................................................5
Bibliography:...................................................................................................................................8

ADVANCE FINANCIAL ACCOUNTING
Answer to Question 1:
Requirement 1:
Acquisition Analysis:
Particulars
Carrying
Amount Fair Value
Net Fair
Value
Share Capital $1,00,000 $1,00,000
Retained Earnings $1,75,000 $1,75,000
Plant $90,000 $1,20,000 $30,000
Computer Equipment $40,000 $60,000 $20,000
Net Fair Value of Identifiable
Assets & Liabilities $1,30,000 $4,55,000 $3,25,000
Add: Amount paid over Equity $2,50,000
Consideration Transferred $5,75,000
Goodwill $2,50,000
Requirement 2:
Dr. Cr.
Date Amount Amount
01-07-2017 Accumulated Depreciation - Plant A/c. Dr. $90,000
Plant A/c. $60,000
Business Valuation Combination Reserve A/c. $30,000
Accum. Dep.- Computer Equipment A/c. Dr. $50,000
Computer Equipment A/c. $30,000
Business Valuation Combination Reserve A/c. $20,000
Goodwill A/c. Dr. $2,50,000
Business Valuation Combination Reserve A/c. $2,50,000
Particulars
In the books of Panda Ltd.
Journal Entries

ADVANCE FINANCIAL ACCOUNTING
Requirement 3:
Dr. Cr.
Date Amount Amount
31-07-2017 Depreciation Expense A/c. Dr. $36,000
Accumulated Depreciation - Plant A/c. $24,000
Accum. Dep.- Computer Equipment A/c. $12,000
Pre-Acquisition Entry:
Share Capital A/c. Dr. $1,00,000
Retained Earnings A/c. Dr. $1,75,000
Business Valuation Combination Reserve
A/c. Dr. $3,00,000
Shares in Smarty Ltd. A/c. $5,75,000
Particulars
In the books of Panda Ltd.
Journal Entries
Answer to Question 2:
Requirement 1:
Acquisition Analysis:
Particulars
Carrying
Amount Fair Value Tax Rate
Net Fair
Value
Share Capital $1,20,000 $1,20,000
General Reserve $25,000 $25,000
Retained Earnings $55,000 $55,000
Land $1,00,000 $1,30,000 30% $21,000
Inventories $78,500 $86,100 30% $5,320
Machinery $52,000 $56,000 30% $2,800
Vehicles $47,000 $53,000 30% $4,200
Brand $29,000 30% $20,300
Goodwill $15,000 -$15,000
Net Fair Value of Identifiable
Assets & Liabilities $2,92,500 $5,54,100 $2,38,620
Consideration Transferred $2,50,000
Goodwill $11,380

ADVANCE FINANCIAL ACCOUNTING
Requirement 2:
Dr. Cr.
Date Amount Amount
Business Combination Entries:
Accumulated Depreciation - Vehicles A/c. Dr. $11,000
Vehicles A/c. $5,000
Deferred Tax Liability A/c. $1,800
Business Valuation Combination Reserve A/c. $4,200
Depreciation Expense A/c. Dr. $1,000
Retained Earnings (1/7/2017) A/c. Dr. $2,000
Accumulated Depreciation - Vehicles A/c. $3,000
Deferred Tax Liability A/c. Dr. $900
Income Tax Expense A/c. $300
Retained Earnings (1/7/2017) A/c. $600
Depreciation Expense A/c. $250
Gain on Sale of Machinery A/c. $5,250
Retained Earnings (1/7/2017) A/c. $700
Income Tax Expenses A/c. $2,250
Trasnfer from BCVR A/c. $3,950
Brand A/c. $29,000
Deferred Tax Liability A/c. $8,700
Business Valuation Combination Reserve A/c. $20,300
Goodwill A/c. $11,380
Business Valuation Combination Reserve A/c. $11,380
Pre-Acquisition Entries:
01-07-2015 Share Capital A/c. $1,20,000
General Reserve A/c. $25,000
Retained Earnings A/c. $55,000
Business Valuation Combination Reserve A/c. $50,000
Shares in Sing Song Ltd. A/c. $2,50,000
31/6/2018 Share Capital A/c. $1,20,000
General Reserve A/c. $10,000
Retained Earnings (1/7/2017) A/c. $76,320
Business Valuation Combination Reserve A/c. $43,680
Shares in Sing Song Ltd. A/c. $2,50,000
Transfer from BCVR A/c. $3,950
Business Valuation Combination Reserve A/c. $3,950
Retained Earnings (1/7/2015) A/c. $5,000
Transfer to General Reserve A/c. $5,000
Transfer from BCVR A/c. $21,000
Retained Earnings (1/7/2017) A/c. $21,000
Transfer from BCVR A/c. $5,320
Retained Earnings (1/7/2017) A/c. $5,320
In the books of Ping Pong Ltd. Ltd.
Journal Entries
Particulars

ADVANCE FINANCIAL ACCOUNTING
Sale of Equipment:
Equipment A/c. $3,000
Income Tax Expenses A/c. $900
Loss on Sale of Equipment A/c. $2,100
Depreciation Expense A/c. $300
Retained Earnings (1/7/2017) A/c. $1,500
Accumulated Depreciation A/c. $1,800
Deferred Tax Asset A/c. $540
Income Tax Expense A/c. $90
Retained Earnings (1/7/2017) A/c. $450
Transfer of Machine to Inventory:
Gain on Sale of Machinery A/c. $800
Cost of Sales A/c. $800
Deferred Tax Asset A/c. $240
Income Tax Expense A/c. $240
Sale of Debentures:
8% Debentures A/c. $25,000
Debentures in Ping Pong Ltd. A/c. $25,000
Profit in Closing Inventories:
Sales Revenue A/c. $75,000
Cost of Sales A/c. $73,750
Inventory A/c. $1,250
Deferred Tax Asset A/c. $375
Income Tax Expense A/c. $375
Dividend Paid:
Dividend Revenue A/c. $5,000
Dividend Paid A/c. $5,000
Dividend Payable:
Dividend Payable A/c. $12,000
Receivables A/c. $12,000
Receivables A/c. $12,000
Dividend Payable A/c. $12,000

ADVANCE FINANCIAL ACCOUNTING
Bibliography:
Collis, J. (2015). Financial Accounting. Macmillan International Higher Education
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education AU.