Financial Accounting: Consolidation Analysis of Davis Ltd - July 2019

This document presents a consolidation analysis assignment based on the acquisition of Davis Ltd by Alma Ltd. The assignment includes pre-acquisition entries, business combination valuation entries, and calculations for non-controlling interest (NCI) share of profit. It covers the application of accounting standards, preparation of journal entries, and explanations related to goodwill, inventory, accumulated depreciation, land valuation, and general reserve adjustments. The assignment also discusses the differences between the partial and full goodwill methods, including how NCI is calculated and the impact on goodwill valuation. References are provided to support the analysis. The solution includes detailed accounting entries and explanations to demonstrate the consolidation process.

Running Head: CONSOLIDATION ANALYSIS
CONSOLIDATION ANALYSIS

Running Head: CONSOLIDATION ANALYSIS
Table of Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................3
Question 3........................................................................................................................................4
Question 4........................................................................................................................................5
Question 5........................................................................................................................................5
References........................................................................................................................................7

Running Head: CONSOLIDATION ANALYSIS
Question 1
Date Particulars Debit Credit
Pre-Acquisition Entries
1st July
2017
General Reserve (1/7/18) Dr
.
$
102,600.00
Share Capital Dr
.
$
298,800.00
Asset revaluation Dr
.
$
127,800.00
Goodwill $
36,390.00
BCVR $
382,410.00
To shares in Davis Limited $
948,000.00
(for consideration given to Davis
limited)
BCVR $
382,410.00
To General reserve $
382,410.00
for transferred to general reserve
Question 2
BUSINESS COMBINATION VALUATION
ENTRIES
Date Particulars Debit Credit
1st July
2017
Goodwill D
r.
$
36,390.00
To BCVR $
36,390.00
for goodwill recorded
Date Particulars Debit Credit
1st July
2017
Inventory D
r.
$
114,000.00
To Deferred tax liability $
34,200.00

Running Head: CONSOLIDATION ANALYSIS
To BCVR $
79,800.00
(for inventory transferred to BCVR)
Date Particulars Debit Credit
1st July
2017
Accumulated depreciation D
r.
$
66,000.00
Gain on sale of vehicle $
266,000.00
TO income tax expense $
19,800.00
Retained earnings D
r.
$
46,200.00
To BCVR $
266,000.00
(for depreciation charged and adjusted
against BCVR)
Date Particulars Debit Credit
1st July
2017
Land D
r.
$
227,000.00
To deferred tax liability $
68,100.00
To BCVR $
158,900.00
(for r and d expenses transferred)
Date Particulars Debit Credit
1st July
2017
General reserve D
r.
$
11,400.00
Share capital $
33,200.00
Asset Revaluation $
14,200.00
BCVR $
42,490.00
To NCI $
101,290.00
for entry of non-controlling interest

Running Head: CONSOLIDATION ANALYSIS
Question 3
30th June
2019
NCI share of profit Dr
.
$
1,495.75
To NCI $
1,495.75
for recording the profit on NCI
Date Particulars Debit Credit
1st July
2017
General reserve Dr
.
$
11,400.00
Share capital $
33,200.00
Asset Revaluation $
14,200.00
BCVR $
42,490.00
To NCI $
101,290.00
for entry of non-controlling
interest
Question 4
30th June
2019
NCI share of profit Dr
.
$
1,495.75
To NCI $
1,495.75
for recording the profit on NCI
Question 5
In the step 1 to 4 the change in case of the partial goodwill will be changed when entered in the
case of the full goodwill method. Full goodwill method is calculated as a difference between the
total fair value and Target Company and the same is mandatory in case of US GAAP. There are
a lot of acquisitions in which acquirer taken into the consideration the ownership for more than

Running Head: CONSOLIDATION ANALYSIS
50% but in that case 100% ownership (Welc, 2015). The partial goodwill method is the method
where the measure of the assets and the liabilities is undertaken. However, the recognition of the
goodwill is only on the basis of the controlling interest in the company; however the full
goodwill method is fundamentally the same as partial method except the level of the interest
which is not considered under the goodwill. In step 1 the NCI is calculated at 90%, however in
case of full goodwill method, the goodwill amount of $36390 will be included in the value of
goodwill (Grathwohl and Voeller, 2016).

Running Head: CONSOLIDATION ANALYSIS
References
Grathwohl, J. and Voeller, D., (2016) full or partial goodwill recognition: An analytical
comparison/Full-Goodwill-order Partial-Goodwill-Bilanzierung: Ein analytischer Vergleich. Die
Betriebswirtschaft, 76(2), p.147.
Welc, J., (2015) Full-Goodwill Method of Accounting for Business Combinations and Quality of
Financial Statements. Journal of Modern Accounting and Auditing, 11(11), pp.549-560.