Consolidation Worksheet, Consolidated Financial Statements - Analysis

This assignment showcases the consolidation of financial statements for Ghost Ltd and Bat Ltd. It begins with a detailed consolidation worksheet, outlining the fair value adjustments for identifiable assets, liabilities, and contingent liabilities at the acquisition date. The worksheet includes entries for business combination valuations, pre-acquisition adjustments, and the impact of intercompany transactions. Part B presents the financial statements for both Ghost Ltd and Bat Ltd, along with a consolidated group statement, incorporating adjustments for sales revenue, cost of sales, other expenses, and tax. The assignment analyzes the impact of goodwill, depreciation, and the sale of non-current assets, providing a comprehensive overview of the consolidation process. The provided solution offers a step-by-step approach to preparing consolidated financial statements, including the necessary adjustments and eliminations. It also covers the treatment of dividends, retained earnings, and the allocation of profits between the parent and subsidiary companies. The assignment demonstrates the application of accounting principles to create a clear and accurate representation of the combined financial performance and position of the group.

Consolidation worksheet, consolidated
financial statements

TABLE OF CONTENTS
Part A.........................................................................................................................................3
Part B..........................................................................................................................................4

PART A
At 1 July 2015:
Net fair value of identifiable assets, liabilities and contingent liabilities of Bat Ltd
Particulars Amount
Equity ($200,000 + $25,000 + $45,000)
Inventory + $10 000 (1 – 30%)
Land + $20,000 (1 –30%)
Plant & Equipment + $4,000 (1 – 30%)
Machinery + $1,000 (1 – 30%)
Trademark $10,000 (1 – 30%)
Goodwill - $25,000
Fair value of net assets acquired $276,500
Cost of acquisition $330,000
Good will (Fair value of net assets acquired- Cost of acquisition) $53,500
Unrecorded goodwill acquired ($53,500 – $25,000) $28,500
Work sheet entries
1 Business combination valuations entries at 30 June 2017
Gain (loss) on sale of non-current assets dr 20,000
Income tax expense cr 6000
Transfer from business combination valuation reserve cr 14000
Trademark dr 10000
Deferred tax liability cr 3000
Business Combination Valuation reserve cr 7000

Accumulated Depreciation dr 114000
Plant and equipment cr 110000
Deferred tax liability cr 1200
Business Combination Valuation reserve cr 2800
Depreciation expense - P&E dr 800
Retained earnings (1/7/16) dr 800
Accumulated depreciation - P&E cr 1600
(4000/5)
Deferred tax liability dr 480
Income tax expense cr 240
Retained earnings (1/7/16) cr 240
Depreciation expense dr 125
Gain or loss of noncurrent assets dr 625
Retained earnings dr 175
Income tax expense cr 225
Valuation reserve cr 700
2 Pre-Acquisition entry
Retained earnings dr 45000
Share capital dr 200000
General reserve dr 25000
Business combination valuation reserve dr 31500
Goodwill dr 28500
Shares in Bat Ltd cr 330000
Pre-acquisition entry 30/6/2017
Retained earnings (1/7/16) dr 52000
Share capital dr 200000
General reserve dr 25000
dr 24500
Goodwill dr 28500
Shares in Bat Ltd cr 330000
*45000+7000BCVR inventory
Transfer from business combination valuation reserve dr 14000
Business combination valuation reserve cr 14000
Transfer from business combination valuation reserve dr 700
Business combination valuation reserve cr 700
Shares in Bat Ltd dr 5000
Interim dividend paid cr 5000

PART B
Financial
Statements
Ghost Bat Adjustments Group
Ltd Ltd Dr Cr
Sales revenue 220 000 182 000 7
8
8 000
18 000
376 000
Other income 62 000 20 000 3
4
5 000
4 000
73 000
282 000 202 000 449 000
Cost of sales 162 000 128 000
4 000
7 000
16 000
5
7
8
263 000
Other expenses 53 000 41 000
1
1
1
800
125
100 10 94 825
215 000 169 000 357 825
Trading profit 67 000 33 000 81 175
Gains/losses on
sale of non-
current assets
22 000 25 000 1
1
6
20 000
625
5 000
5 000 11 26 375
Profit before
tax 89 000 58 000 117 550
Tax expense 20 000 18 000
5
1
0
1
1
1 200
30
1 500
6 000
240
225
1 500
300
600
1
1
1
6
7
8
31 865
Profit 69 000 40 000 85 685
Retained
earnings
30 000 45 000 1
1
2
5
9
1
0
800
175
52 000
2 800
700
15
240
50 1
10
18 800
(1/7/19)
Transfer from
BCV reserve 0 0 2 14 700 14 000
700
1
1 0-
99 000 85 000 104 485
Dividend paid 12 000 10 000 5 000
5 000
2
3 12 000
Dividend
declared 6 000 4 000 4 000 4 6 000
18 000 14 000 18 000
Retained
earnings
81 000 71 000 86 485

(30/6/20)
Share capital 312 000 200 000 2 200 000 312 000
General reserve 20 000 25 000 2 25 000 20 000
BCVR - - 2 9 800 7 000
2 800
1
1 -
Total Equity 413 000 296 000 418 485
Deferred tax
liabilities - -
1 480 3 000
1 200
1 500
1
1
11
5 220
Dividend
payable 6 000 4 000 4 4 000 6 000
Current tax
liability 8 000 2 500 10500
Loan from
Ghost Ltd - 12 000 1
1 12 000
Provisions 78 000 169 500 247 500
Total
Liabilities 92 000 188 000 269 220
Total
Liabilities +
Equity
505 000 484 000 687 705
Shares in Bat
Ltd 325 000 -- 325 000 2
Cash 7 800 35 000 42 800
Inventory 20 000 50 000
5 000
1 000
2 000
6
7
8
62 000
Receivables 6 000 20 000 4 000 4 22 000
Land 25 000 50 000 1
1 5 000 80 000
Plant &
equipment 113 000 300 000 110 000 1 303 000
Accumulated
depreciation –
P & E
(34 000) (114 000) 1 114 000 1 600 1 -35 600
Machinery 15 000 15 000 30 000
Accumulated
depreciation –
Mach.
(1 000) (3 000)
-4 000
Furniture 7 000 8 000 1000 9 14 000
Accumulated
depreciation –
Furn.
(1 000) (2 000) 1
0 150 -2 850
Trademark 100 000 1 10 000 110 000
Goodwill - 25 000 2 28 500 53 500

Deferred tax
assets
10 200
-
6
7
8
9
1 500
300
600
300
45 10
12 855
Loan to Bat
Ltd 12 000 - 12 000 11
Total assets 505 000 484 000 687 705