Advanced Accounting: Consolidation & Non-controlling Interests

This assignment solution provides a detailed analysis of consolidation accounting, focusing on non-controlling interests (NCI). It includes journal entries for acquisition, fair value adjustments, intercompany transactions, and goodwill calculation. The solution addresses topics such as the elimination of intercompany sales, depreciation adjustments on acquired assets, and the impact of deferred taxes. It covers the accounting treatment for dividends, unrealized profits, and the calculation of the carrying amount of investments. The assignment also includes journal entries for various transactions, such as sales, cash settlements, and loan-related entries, demonstrating a comprehensive understanding of consolidation principles and practices.

ANSWER 1
Acquisition Analysis:
Share Capital 300000
Retained Earnings 20000
Value of Identifiable Assets 320000
Add: Fair Value Adjustment 15000
Fair Value of Net Identifiable Assets 335000
Consideration transferred 305600
Value of Business 382000
Value Of Goodwill 47000
NCI Interest 75000
Gain on Acquisition 28000
Peaceful Ltd
Journal
Date Particulars Debit Credit
30-6-19 Retained Earnings 30000
Share Capital 20000
Business Combination Valuation Reserve 88600
Non Controlling Interest 75000
Gain on Acquisition of Business 28000
Purchase Consideration Transferred 305600
(Acquisition Entry)
30-6-19 Retained Earnings 66000
Accumulated Depreciation-Machinery 66000
(To record accumulated Depreciation on
machinery in the previous year)
30-6-19 Deffered Tax Assets 19800
Retained Earnings 19800
(to record tax effect on above)
30-6-19 Depreciation Expense 24750
Accumulated Depreciation-Machinery 24750
(To record accumulated depreciation on
machinery for the current year)
30-6-19 Current Tax Liability 7425
Income Tax Expenses 7425
(To record tax effect on above)
30-6-19 Retained Earnings 4000
Plant 4000
(To eliminate profit on sale of plant inter-
company)
30-6-19 Deferred Tax Assets 1200
Retained Earnings 1200
(To record tax effect on above)

30-6-19 Accumulated Depreciation-Plant 120
Retained Earnings 120
(To eliminate depreciation charged on
above)
30-6-19 Retained Earnings 36
Deferred Tax Liability 36
(To eliminate tax effect on above)
30-6-19 Sales Revenue 500
Cost of Sales 500
(To eliminate inter company sale of
inventory)
30-6-19 Sales Revenue 12000
Cost of Sales 11500
Inventory 500
(To eliminate inter company sale)
30-6-19 Current Tax Liability 150
Tax Expenses 150
(To record tax effect on above)
30-6-19 Retained Earnings 4000
Goodwill 4000
(To write down the value of Goodwill)
30-6-19 Deferred tax Assets 1200
Retained Earnings 1200
(To record tax effect on above)
ANSWER 2
Acquisition analysis at 1 July 2018:
Net fair value of identifiable assets
and liabilities of Binny Ltd = ($250000+$175000) (equity)
= $425000
Shares of Abby Ltd(30%) = $127500
Consideration transferred = $160000
Goodwill = $32500
Calculation of Carrying Amount of
Investment at 1 july 2019:
Investment in Binny Ltd $127500
Add: Goodwill = $32500
Cost of Investment = $160000
Add: Share in Profit at 1 July 2019 = $35250

Carrying Amount of Investment = $195250
Calculation of Share in Profit at 1 july
2019:
Profit after Income Tax $120000
Add: Dividend Distribution Tax(30%) = $15000
Less: Unrealised Profit of stock = $17500(1-30%)
Profit = $117500
Abby Ltd (30%) = $35250
Abby Ltd
Journal
Date Particulars Debit Credit
30-6-19 Sales Revenue 60000
Cost of Sales 35000
Inventory 25000
(To eliminate inter company transaction)
30-6-19 Current Tax Liability 7500
Income tax Expenses 7500
(To record tax effect on above)
30-6-19 Sales Revenue 20000
Cost of Sales 15000
Inventory 5000
(To eliminate inter company transaction)
30-6-19 Current Tax Liability 1500
Income tax Expenses 1500
(To record tax effect on above)
30-6-19 Retained Earnings 9000
Dividend Paid 9000
(To eliminate inter company payment of
dividend paid)
30-6-19 Retained Earnings 6000
Dividend Declared 6000
(To eliminate inter company effect of
dividend declared)
ANSWER 3
Date Journal Entries of Transaction A
1/1/2019 Receivables A/C Dr 2 63 899

To Sales A/C Cr 2 63 899
(Being Sales Recorded)
29/1/2019 Cash A/C Dr 2 54 582
Profit and Loss A/C Dr 9 317
To Receivables A/C Cr 2 63 899
(Being Cash Settlement Recorded)
Date Journal Entries of Transaction B
1/7/2017 Cash A/C Dr 4 58 365
To Loan A/C Cr 4 58 365
(Being Loan Taken)
30/6/2018 Interest A/C Dr 54 590
Profit and Loss A/C Dr 37 913
To Loan A/C Cr 92 503
(Being Interest Recorded and Loan
amount Revalued)
30/6/2019 Interest A/C Dr 57 641
Profit and Loss A/C Dr 25 546
To Loan A/C Cr 83 187
(Being Interest Recorded and Loan
amount Revalued)