Corporate Accounting Report: Acquisition Analysis and Journal Entries

This report provides a comprehensive analysis of corporate accounting principles, focusing on the acquisition of Possum Ltd by Lead Beaters. It includes detailed journal entries for the consolidation process, incorporating adjustments for inventory, plant and machinery, and contingent liabilities, with a tax rate of 30% considered. The calculation of goodwill is explained, based on the difference between the actual amount paid and the net identified fair value of the acquired company. Furthermore, the report presents worksheet entries, illustrating the consolidated financial position, and offers a rationale behind each transaction, referencing relevant accounting standards and practices. This document is intended to provide a clear understanding of the complexities involved in corporate acquisitions and consolidated financial statement preparation.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note:

1CORPORATE ACCOUNTING
Table of Contents
Acquisition Analysis........................................................................................................................2
Journals............................................................................................................................................2
Worksheet Entries............................................................................................................................4
Rationale behind the Transactions...................................................................................................5
Bibliography....................................................................................................................................6

2CORPORATE ACCOUNTING
Acquisition Analysis
Particulars
Amount
($)
Amount
($)
Equity Share 450000
Reserves General 45000
Asset revaluation surplus 45000
Retained earnings 15000
Total Recorded Value of Equity 555000
Inventory 10500
Plant and Machinery 5250
Total Identified Asset Fair Value 15750
Contingent Liabilities 12600
Total Identified Liabilities 12600
Total Identified Value (Net of Taxes) 558150
Paid in Value 580000
Goodwill Identified 21850
Journals
The consolidation of the Lead Beaters and Possum Ltd was done by applying the various
transactions and transactions that were included in the application of the consolidated financial
statement of the company. Relevant Journals entries were passed after incorporating the
transaction that were done by the company on a intergroup transaction basis (Hoyle, Schaefer
and Doupni 2015).

3CORPORATE ACCOUNTING
Particulars Dr Cr
Retained earnings 12900
Share capital 450000
General reserve 45000
Asset value surplus as at 01.07.2016 45000
Business combination valuation reserve 27100
Shares in Possum Ltd acquired 580000
Share capital 45000
General reserve 45000
Transfers from business combination valuation reserve 5250
Business combination valuation reserve 5250
Depreciation expense 750
Gain on sale of non-current assets 3750
Income tax expenses 1350
Retained earnings 2100
Revaluation reserve transferred 5250
Goodwill 21850
Business combination valuation reserve 21850
Accumulated depreciation 1800
Retained earnings 900
Depreciation expenses 900
Retained earnings 4200
Deferred tax asset 1800
Plant 6000
Retained earnings 270
Income tax expenses 270
Deferred tax asset 540
Retained earnings 525
Deferred tax asset 225
Inventory 750
Dividend payable 6000
Dividend declared 6000
Dividend revenue 6000
Dividend receivable 6000
Journals
Business Consolidation

4CORPORATE ACCOUNTING
Worksheet Entries
Particulars
Lead beaters
Ltd
Possum
Ltd Adjustments
Combine
d
Dr Cr
Plant and Equipments 558750 318000 6000 870750
Less: Depreciation Charged -318000 -165000 1200 -481800
Land and Buildings 531300 397500 928800
Invstment in Possum Ltd 580000 - 580000 -
Stock/Inventory 280000 240000 750 519250
Account Recvables 43500 22500 6000 60000
Cash and Cash Equivalents 37500 15000 52500
Total assets 1713050 828000 1949500
Dividend payable 15000 6000 6000 15000
Other current liabilities 52050 60000 112050
Loans 150000 60000 210000
Total liabilities 217050 126000 337050
Share capital 1200000 495000 495000 1200000
Asset revaluation surplus 225000 120000 45000 300000
Retained earnings (1/7/16) 22500 18000 19905 600 21195
Revenues 162000 210000 6000 366000
Expenses -48000 -80000 750 600 -128150
Gains/(losses) on sale of non-current assets 6000 5000 3750 7250
Tax expense -52500 -60000 180 1350 -111330
Dividend declared -15000 -6000 6000 -15000
Deferred tax asset - - 2025 360 -1665
Goodwill - - 21850 -21850
Total equity 1500000 702000 1616450
Total Liability and Equity 1953500

5CORPORATE ACCOUNTING
Rationale behind the Transactions
The business consolidation was performed between the Lead Beaters and Possum Ltd
where the necessary transactions and accounts were analysed and then consolidated for getting
the relevant accounts and details into account. Consolidated financial statement has been
prepared after talking the adjustment of the inventory, plant and machinery and contingent
liability of the company. Relevant tax rate of 30% was taken into consideration for the analysis
and the inclusion of the same was considered for the financial statement of the company (Patel
2015). The goodwill consideration was calculated by taking the actual amount paid by the
company for the net identified fair value of the company and the actual value paid. The
difference in the fair value and consideration was taken as the goodwill amount. The
classification of the various expenses and the retained profits of the company was also derived
by taking relevant account details and transactions for the company (Trigo, Belfo and Estébanez
2016).

6CORPORATE ACCOUNTING
Bibliography
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Lubbe, I., Modack, G. and Watson, A., 2014. Financial accounting GAAP principles. OUP
Catalogue.
Trigo, A., Belfo, F. and Estébanez, R.P., 2016. Accounting Information Systems: evolving
towards a business process oriented accounting. Procedia Computer Science, 100, pp.987-994.
Patel, F., 2015. Effects of accounting information system on organizational profitability.
International Journal of Research and Analytical Reviews, 2(1), pp.168-174.