University Corporate Reporting Assignment: Tax and Consolidation

This document presents a comprehensive solution to an advanced corporate reporting assignment, meticulously addressing tax accounting and consolidation principles. The assignment is divided into two main questions. Question 1 delves into current tax liabilities, requiring the preparation of a current tax worksheet, analysis of temporary differences, and the calculation of tax expense with corresponding journal entries. Question 2 focuses on business combinations and the preparation of consolidated financial statements. It involves detailed journal entries for pre-acquisition, non-controlling interest (NCI) calculations, and adjustments for intercompany transactions, including sales of inventory, machinery, and loan transactions. The solution culminates in the preparation of a consolidated income statement and balance sheet, demonstrating a strong understanding of complex financial reporting concepts. Bibliographies of the resources used are also provided.

Running head: ADVANCED CORPORATE REPORTING
Advanced Corporate Reporting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ADVANCED CORPORATE REPORTING
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Part A:........................................................................................................................2
Answer to Part B:.........................................................................................................................6
Answer to Part C:.........................................................................................................................7
Answer to Question 2:.....................................................................................................................7
Answer to Part 1:.........................................................................................................................7
Answer to Part 2:.......................................................................................................................14
Answer to Part 3:.......................................................................................................................18
Bibliographies:...............................................................................................................................21

2ADVANCED CORPORATE REPORTING
Answer to Question 1:
Answer to Part A:
Current tax worksheet
for the year ended 30 June 2017
Particulars Amount (in $) Amount (in $)
Operating profit before income tax 3,500,000
Add:
Goodwill impairment loss 200,000
Doubtful debts expense 45,000
Depreciation expense- plant and
equipment 160,000
Long service leave expense 105,000
Entertainment expense 75,000
Warranty expense 50,000
Amortisation expense- Research and
development 12,000 647,000
4,147,000

3ADVANCED CORPORATE REPORTING
Deduct:
Bad debts written off 65,000
Long service leave paid 90,000
Tax depreciation- plant and
machinery 200,000
Warranty expense paid 150,000 550,000
Research and development paid 3,597,000
Taxable income
Current tax liability @30% 1,079,100
Items Statement of
Financial Position ($)
Tax
bases
($)
Deducti
ble
Tempo
rary
Differe
nces ($)
Taxab
le
Temp
orary
Differ
ences
($)
Tax
expe
nse
($)
Curren
t tax
payabl
e ($)
Assets:
Cash

4ADVANCED CORPORATE REPORTING
2,50,000 -
Inventory
3,50,000 -
Accounts Receivable
(Net) 7,40,000
3
,50,000
3,
90,00
0
Plant and Equipment
(Net) 4,80,000
6
,00,000
1
,20,000
Research and
Development Cost 1,08,000 -
Goodwill
6,00,000 -
25,28,000
Liabilities:
Payables
7,80,000 -
Provision for Long
Service Leave 1,15,000 -
Provision for
Warranty Expense 80,000 -
Loan
11,00,000 -

5ADVANCED CORPORATE REPORTING
20,75,000
Net Assets
4,53,000
Temporary
Differences at end of
period
1
,20,000
3,
90,00
0
Less: Prior end
balance 49,500 -
Movement for the
period 70,500
3,
90,00
0
Tax effect at 30%
10,79,100
Tax taxable income
*30%
10,7
9,100
Income tax
adjustments
10,
79,100
Workings:
Calculation of depreciation expense- Plant and equipment:
Purchase of plant and equipment $ 800,000
Depreciation rate 20%

6ADVANCED CORPORATE REPORTING
Depreciation expense $ 160,000
Calculation of amortisation of research and development
expense:
Research and development costs $ 120,000
Estimated life in years 5
Amortisation for the current year 0.5
Amortisation rate 20%
Amortisation expense $ 12,000
Calculation of tax depreciation- Plant and equipment:
Purchase of plant and equipment $ 800,000
Depreciation rate 25%
Tax depreciation expense $ 200,000
Answer to Part B:
Journal entry:
Date Particulars
Debit Credit
Amount (in $) Amount (in $)
30/06/201
7 Income Tax Expense Account…………Dr 1,079,100
To Current Tax Liability Account 1,07

7ADVANCED CORPORATE REPORTING
9,100
Answer to Part C:
Journal entries:
Date Particulars
Debit Credit
Amount (in $) Amount (in $)
30/06/2017 Income Tax Expense Account…………Dr 10,79,100
To Current Tax Liability Account 10,79,100
30/06/2017 Income Tax Expense Account…………Dr 17,625
Deferred Tax Asset Account……Dr 79,875
To Deferred Tax Liability Account 97,500
Answer to Question 2:
Answer to Part 1:
Date Particulars Amount Amount
1 Business Combination
Entries:
1.a Non-Current Assets A/c. Dr. $800,000
To, Deferred Tax Liability $240,000

8ADVANCED CORPORATE REPORTING
A/c.
To, Business Combination
Valuation Reserve A/c.
$560,000
1.b Operating Expense A/c. 80000
Retained Profit (1/7/16)
A/c.
320000
Non-Current Assets A/c. 400000
1.c Deferred Tax Liability
A/c.
120000
Income Tax Expenses A/c. 24000
Retained Profits (1/7/16)
A/c.
96000
1.d Revaluation Surplus A/c. $1,150,000
Goodwill A/c. $1,150,000
2 Pre-Acquisition Entries on 1 July 2012:
Share Capital A/c. $4,800,000
General Reserve A/c. $2,400,000
Retained Profit A/c. $2,400,000
Goodwill A/c. $3,320,000
Business Combination $920,000

9ADVANCED CORPORATE REPORTING
Valuation Reserve A/c.
Investment A/c. $12,000,00
0
3 Pre-Acquisition Entries on 30 June 2017:
Share Capital A/c. $4,800,000
General Reserve A/c. $2,560,000
Retained Profit (1/7/2016)
A/c.
$4,439,648
Revaluation Surplus A/c. $448,000
Goodwill A/c. $3,320,000
Business Combination
Valuation Reserve A/c.
$3,567,648
Investment A/c. $12,000,00
0
4 NCI Share of Equity on 1/7/2012:
Share Capital A/c. $1,200,000
General Reserve A/c. $640,000
Retained Profit A/c. $1,109,912
Revaluation Surplus A/c $112,000
Business Combination
Valuation Reserve A/c.
$891,912

10ADVANCED CORPORATE REPORTING
NCI A/c. $2,170,000
5 Dividend Paid:
5.a Other Income A/c. 640000
Interim Dividend Paid
A/c.
640000
5.b NCI A/c. 160000
Interim Dividend Paid
A/c.
160000
7 Dividend Declared:
7.a Other Income A/c. 960000
Proposed Final Dividend
A/c.
960000
7.b Liabilities A/c. 960000
Current Assets A/c. 960000
7.c NCI A/c. 240000
Proposed Final Dividend
A/c.
240000
8 Profit on Opening Stock:

11ADVANCED CORPORATE REPORTING
8.a Reatined Profit (1/7/16)
A/c.
513800
Income Tax Expenses A/c. 220200
Cost of Goods Sold A/c. 734000
8.b NCI Share of Profit A/c. 102760
Retained Profit (1/7/16)
A/c.
102760
9 Sales of Inventory in Current Period:
9.a Sales A/c. $25,000,00
0
Cost of Goods Sold A/c. $24,319,50
0
Current Assets A/c. $680,500
9.b Deferred Tax Assets A/c. $204,150
Income Tax Expenses A/c. $204,150
10 Sale of Machinery:
10.a Retained Profit (1/7/16)
A/c.
315000
Deferred Tax Assets A/c. 135000

12ADVANCED CORPORATE REPORTING
Non-Current Assets A/c. 450000
10.b NCI A/c. 63000
Retained Profit (1/7/16)
A/c.
63000
10.c Non-Current Assets A/c. 45000
Retained Profit (1/7/16)
A/c.
30000
Operating Expense A/c. 15000
10.d Income Tax Expenses A/c. 4500
Retained Profit (1/7/16)
A/c.
9000
Deferred Tax Assets A/c. 13500
10.e NCI Share of Profit A/c. 4200
Retained Profit (1/7/16)
A/c.
8400
NCI A/c. 12600
11 Loan & Interest on Loan:
11.a Other Income A/c. 150000
Operating Expense A/c. 150000

13ADVANCED CORPORATE REPORTING
11.b NCI Share of Profit A/c. 37500
Operating Expense A/c. 37500
11.c Liabilities A/c. $2,500,000
Investments A/c. $2,500,000

14ADVANCED CORPORATE REPORTING
Answer to Part 2:
Adjustments NCI
Particulars Green
Bay
Blue
Star
Debit Credit Group Debi
t
Credi
t
Parent
Sales $125,00
0,000
$75,000
,000
9.a $25,00
0,000
$175,00
0,000
$175,00
0,000
Cost of Goods
Sold
($80,00
0,000)
($69,00
0,000)
($25,05
3,500)
8.a,9.a ($123,94
6,500)
($123,94
6,500)
Gross Profit $45,000
,000
$6,000,
000
$51,053,
500
$51,053,
500
Other Income $5,000,
000
$3,000,
000
5.a,7.a,11.a $1,750,
000
$6,250,0
00
$6,250,0
00
Operating
Expenses
($4,000,
000)
($2,600,
000)
1.b ($80,0
00)
($202,5
00)
10.c,11.a,
11.b
($6,477,
500)
($6,477,
500)
Operating
profit before
income tax
$46,000
,000
$6,400,
000
$50,826,
000
$50,826,
000