Corporate Accounting: Preparing Consolidated Financial Statements

This report provides a detailed analysis of corporate accounting principles, focusing on acquisition analysis, the preparation of journal entries for consolidation and worksheets, and the rationale behind intra-group transactions. It examines the net fair value of assets and liabilities, including inventory, contingent liabilities, and machinery, to determine goodwill. The report also delves into the rationale behind intra-group transactions, particularly concerning retained earnings, inventory, and deferred tax assets, highlighting the importance of eliminating profits on consolidation for external reporting accuracy. Finally, it presents consolidated financial statements, illustrating the financial position and performance of the consolidated entity. Desklib offers this document as a valuable resource, among many others, for students seeking assistance with their assignments and a deeper understanding of corporate accounting concepts.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
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1CORPORATE ACCOUNTING
Table of Contents
Preparing the acquisition analysis:..................................................................................................2
Preparing the journal entries for the Consolidation:........................................................................3
Preparing the journal entries for the worksheet:..............................................................................3
Providing the rationale of the intra-group transactions:..................................................................4
Preparing the consolidated financial statements:.............................................................................6
References:......................................................................................................................................8

2CORPORATE ACCOUNTING
Preparing the acquisition analysis:
Particulars Amount
Share Capital (A) 4,50,000.00$
Asset Revaluation Surplus (B) 45,000.00$
General Reserve (C) 45,000.00$
Gross Assets (D=A+B+C) 5,40,000.00$
Particulars Amount
Fair Value of Inventory (A) 1,75,000.00$
Book Value of Inventory (B) 1,60,000.00$
Inventory (C=A+B) 15,000.00$
Valuation (D) 70%
Inventory Value (E=C*D) 10,500.00$
Particulars Amount
Fair Value of Contingent Liability (A) 18,000.00$
Valuation (B) 70%
Contingent Liability Value (C=A*B) 12,600.00$
Net Fair Value of Assets and Liabilities:-
Net Fair Value of Assets and Liabilities:-
Net Fair Value of Assets and Liabilities:-
Particulars Amount
Fair Value of Machinery (A) 2,27,500.00$
Book Value of Machinery (B) 2,20,000.00$
Machinery (C=A+B) 7,500.00$
Valuation (D) 70%
Machinery Value (E=C*D) 5,250.00$
Particulars Amount
Inventory 10,500.00$
Contingent Liability 12,600.00$
Machinery 5,250.00$
Total Fair Value of Acquisition 3,150.00$
Gross Assets 5,40,000.00$
Net Fair Value of Identifiable Assets and Liabilities 5,43,150.00$
Particulars Amount
Shares in Possum Limited (A) 5,50,000.00$
Price of Acquisition (B) 5,43,150.00$
Goodwill (C=A+B) 6,850.00$
Net Fair Value of Assets and Liabilities:-
Net Fair Value of Assets and Liabilities:-

3CORPORATE ACCOUNTING
Preparing the journal entries for the Consolidation:
Preparing the journal entries for the worksheet:

4CORPORATE ACCOUNTING
Providing the rationale of the intra-group transactions:
There is certain rationale of the intra-group transaction, which are conducted for
smoothly completing the consolidated annual report. The intra group transaction are mainly
conducted on internal basis, as they are not linked with the external sources (Hoyle, Schaefer and
Doupnik 2015). There is relevant rationale for the retained earnings, inventory and deferred tax

5CORPORATE ACCOUNTING
asset of the organisation, which is being used in the intra-group truncations. The analysis of the
rationale is depicted as follows.
Analysing the income tax expense or the deferred tax assets:
There is specific valuation regarding the current carrying values of the investor, which
has directly affected the tax base of the organisation. Therefore, the unearned revenues are being
omitted in the group transaction, which has resulted in the creation of deferred tax asset (Florou,
Kosi and Pope 2017).
Analysing the retained earnings:
The retained earnings of the organisation mainly comprise of inventory sales, which is
conducted within the group. The specific sales are mainly conducted through external entities
rather it is done within the group, which is why the elimination of the profit on consolidation
needs to be conducted. Gains on the inventory are mainly measures when it is sold to the outside
entity, where any transaction within the group does not need any consolidated adjustments.
Analysing the inventory position:
The inventory position of Leadbeaters limited is measured at cost, while the unrecognised
profits is also added to the investor value. However, the cost of the group investors values is
recorded by lowering the unearned revenues values from the actual inventory held by the
company.

6CORPORATE ACCOUNTING
Preparing the consolidated financial statements:

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References:
Florou, A., Kosi, U. and Pope, P.F., 2017. Are international accounting standards more credit
relevant than domestic standards?. Accounting and Business Research, 47(1), pp.1-29.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.