Super Retail Ltd. and New World Ltd. Combination Project

This practical project analyzes the business combination of Super Retail Ltd. and New World Ltd. The assignment details the acquisition analysis, including the net fair value of assets and related journal entries at the acquisition date of July 1, 2017. It further presents adjustment and elimination journal entries for consolidation as of June 30, 2018, and June 30, 2019. The project also calculates and shows the impact of intercompany transactions, such as inventory purchases, sales, and adjustments for depreciation, goodwill, and dividends. Part B provides an explanation and discussion of business combinations, addressing potential impediments and compliance with IFRS and AASB standards. The project concludes by summarizing the consolidation requirements for companies holding a majority stake in another, and the need to adhere to accounting standards for adjustments and reporting.

Practical Project

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
1. Showing acquisition analysis and adjustment and elimination journal entries for
consolidation at acquisition, 1 July 2017.....................................................................................1
2. Preparing adjustment and elimination journal entries for consolidation as at 30 June 2018,..1
3. Calculating and showing adjustment and elimination journal entries for consolidation as at
30 June 2019................................................................................................................................2
PART B............................................................................................................................................4
Providing explanation and discussion of business combination..................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
The present study shows various adjustments and journal entries in the books of Super
Retail Ltd. Who is 100% holding company of New World Ltd. In addition, the study also shows
a brief discussion about business combination of Super Retail Ltd. And New World Ltd.
PART A
1. Showing acquisition analysis and adjustment and elimination journal entries for consolidation
at acquisition, 1 July 2017
Acquisition analysis at 1 July 2015
Net fair value of the assets
particular amount ($) amount ($)
share capital 260000
retained earning 200000
plant 40000
total net fair value of the asset 500000
Journal entries in the books of Super retail Ltd. At acquisition, 1 July 2017
date particular amount ($) Amount ($)
1 accumulated depreciation account Dr. 60000
To plan 60000
(Being accumulated depreciation
charged)
2 depreciation account Dr. 10000
to Accumulated depreciation account 10000
(being accumulated depreciation
adjusted)
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2. Preparing adjustment and elimination journal entries for consolidation as at 30 June 2018,
journal entries for consolidation as at 30 June 2018
date particular amount ($) Amount ($)
1 purchase account Dr. 30000
to cash 30000
(Being inventory purchased from New
World Ltd.)
2
business combination valuation
account Dr. 8000
to Purchase account 8000
(Being profit earned by sale of
inventory by New world Ltd adjusted)
Adjustment and elimination in the books of super retail Ltd.
Calculation of value of inventory at the end of year
particular Amount ($) Amount ($)
inventory held by super retail ltd. 15000
less:
amount of profit added by new world
ltd. 4000
value of inventory 11000
3. Calculating and showing adjustment and elimination journal entries for consolidation as at 30
June 2019
Adjustment and elimination in the books of Super retail Ltd.
particular Amount ($) Amount ($)
cost value of inventory acquired
from new world ltd. 36000
less: profit amount added 7000
closing value of inventory 29000
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Journal entries for consolidation as at 30 June 2019
date particular amount ($) Amount ($)
1 cash account Dr. 62000
to sales account 62000
(Being inventory sold to New retail
Ltd.)
2 purchase account Dr 65000
to cash 65000
(Being inventory purchased from
New Retail Ltd.)
3 cash account Dr. 145000
to machinery 100000
to business combination valuation
account 45000
( Being inventory sold to New World
Retail Ltd.)
4 depreciation account Dr. 68650
to Accumulated depreciation account 68650
(Being depreciation adjustment entry
done)
5 cash account Dr. 8000
accrued income Dr. 1000
to New World retail 9000
(Being services provide to New
World Ltd. And part payment
received)
6 cash account Dr. 1000
interest on loan account Dr 1000
to New World retail 1000
(Being part amount of interest on loan
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received)
7 goodwill account Dr. 6000
To business combination valuation
account 2000
to accumulated impairment account 4000
(Being Goodwill amount adjusted)
8 cash account Dr. 150000
accrued income Dr. 50000
to dividend account 200000
(Being part amount of dividend
received)
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PART B
Providing explanation and discussion of business combination
Acquisition requires an organisation to analyse the operational efficiency of such specific
business (Yonelinas and et.al., 2019). It includes the market share, profitability, capital
generation as well as level of operation governed by that organisation in the market. In relation
with Super Retail company on which directors are aiming for acquiring an overseas business.
However, they have approached towards the acquisition of a business in operating America.
There might be several impediments as per IFRS and AASB which would affect the plan for
such acquisition such as:
Overlooking the competition: There must be proper ascertainment and analysis over the
market scenario as well as rivalries stated in the market. However, these are the challenges which
would have negative impact on Super Retail for such Acquisition.
Cash flow issues: There might be issues which are relevant with the increased costs and
expenses which would lead the firm in debts. However, it created obstacles in managing the
solvency of an entity (Adam and Moutos, 2017). It ensures the businesses in managing the costs
over the revenue gains through the sources. It defines managerial personnel for making accurate
decisions to overcome with such financial risks stated in the business operations.
Disruptive technology and paradigm shift: Use of technical devices for running the
business operations which would affect the business in sustaining gains as well as creates
barriers in the business operations (Pu and et.al., 2018). use of upgraded techniques, machine’s
and equipment would have positive impacts on retaining the productive gains s well as reduces
the time spend on a particular activity.
Lack of budget: There has been issues which are relevant with the budgeting process.
However, it sis required that the business must consider to follow the variance strategies which
would be effective in measuring the costs and revenue on the basis of actual outcomes with
estimated amounts (Xu and et.al, 2015).
CONCLUSION
From the analysis of the above project, it can be analysed that if a company holds more
than 50% of shares in any another company, it needs to consolidated books of accounts of both
the companies. Further, it needs to adjust all the profits, expenses and other incomes generated
by the businesses from each other. In addition, the study has also concluded that if the company
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combines two businesses, it needs to comply with all the adjustments, and requirements provided
by IFRS and AASB.
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