Corporate Accounting Assignment: Acquisition and Consolidation

This assignment solution delves into corporate accounting, specifically focusing on the acquisition of Davis Ltd. by Ethan Ltd. It begins with an acquisition analysis, detailing the fair value and consideration transferred, resulting in a calculated gain. The solution then provides business combination valuation entries (BCVR), pre-acquisition entries, and journal entries to recognize the Non-Controlling Interest (NCI). It includes consolidated worksheet entries to understand the financial position of Ethan Ltd. The document also explains the difference between the partial and full goodwill methods, highlighting their impact on net identifiable assets and goodwill valuation. The assignment provides a comprehensive understanding of accounting for business combinations and consolidation.

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

1CORPORATE ACCOUNTING
Table of Contents
1. Acquisition Analysis of the organisation:..............................................................................2
2. Business Combination Valuation Entries (BCVR):...............................................................2
3. Journal entry to recognise NCI:.............................................................................................4
4. Consolidated worksheet entries at 30 June 2020:..................................................................4
5. Explaining the step by providing the full goodwill method:..................................................5
References:.................................................................................................................................6

2CORPORATE ACCOUNTING
1. Acquisition Analysis of the organisation:
Acquisition Analysis at July 2019
Particulars Value
Inventories 89,180
Land 1,78,360
Vehicle 2,08,299
Fittings 4,427
Liabilities (Contingent) 31,850
Share capital 3,72,190
General reserve 1,59,250
Asset revaluation surplus 1,27,400
Net fair value 11,70,956
Consideration
transferred 11,68,000
Gain on acquisition 2,956
The Acquisition analysis has been conducted in the above table, which has indicated
on the adequate gain on acquisition achieved by Ethan Ltd. The overall calculations have
directly specified that the gain on acquisition be at the levels of 2,956, as the consideration is
paid less whereas the net fair value is higher for the acquired Davis Ltd. Ethan Ltd pays a
consideration amount of 1,168,000 to Davis Ltd for 91% of its shares. However, Ethan Ltd
has received a fair value in assets worth 1,170,956, which makes the total gain on acquisition
at the levels of 2,956.
2. Business Combination Valuation Entries (BCVR):
WORKSHOP ENTRIES AT 30 JUNE, 2020
Business combination value entries
Particulars Amount Amount
BCVR………………………..Dr 2,956
Gain on acquisition 2,956
Inventories……………Dr 1,27,400
Income tax expense 38,220
Transfer from BCVR 89,180
Land………………………Dr 2,54,800

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Deferred tax liability 76,440
BCVR 1,78,360
Accumulated Depreciation (Vehicles)……….Dr 74,620
Vehicle…………………………….Dr 2,97,570
Deferred tax liability 1,11,657
BCVR 2,60,533
Accumulated Depreciation (Fittings)……….Dr 3,162.25
Vehicle…………………………….Dr 6,324.50
Deferred tax liability 2,846
BCVR 6,641
Depreciation expense (Vehicles)…………………Dr 67,739
Accumulated depreciation (Vehicles) 67,739
Depreciation expense (Fittings)…………………Dr 1,727
Accumulated depreciation (Fittings) 1,727
Deferred tax liability…………….Dr 20,322
Deferred tax liability…………….Dr 518
Income tax expense 20,840
BCVR 31,850
Deferred tax asset 13,650
Contingent liabilities 45,500
PRE ACQUISITION ENTRIES 2020
Particulars Amount Amount
Share capital…........Dr 3,72,190
General reserve…........Dr 1,59,250
Asset revaluation surplus…........Dr 1,27,400
BCVR…....................Dr 3,83,124
Shares in Davis Ltd 10,39,008
Gain on acquisition 2,956
Transfer from BCVR……………Dr 89,180
BCVR 89,180
The pre-acquisition entries and business-combination value entries are directly
depicted in the above tables, which allow Ethan Ltd to draft adequate level of journal entries

4CORPORATE ACCOUNTING
to understand the acquisition process (Robinson 2020). The calculations directly allow the
organization to determine the values of general reserve, asset revaluation surplus, assets,
liabilities and share capital, as it would help in preparing the consolidated worksheet for
Ethan Ltd.
3. Journal entry to recognise NCI:
NCI ENTRIES at ACQUISITION 2020
Particulars Amount Amount
Share capital…........Dr 36,810
General reserve…........Dr 15,750
Asset revaluation surplus…........Dr 12,600
BCVR…....................Dr 37,891
NCI 1,03,051
The NCI entries for Davis Ltd have been conducted in the above table, where 9% of
the ownership is still intact for the organisation. The journal entries would mainly hep to
determine the action of the NVI and its valuation for the year of 2020.
4. Consolidated worksheet entries at 30 June 2020:
WORKSHOP ENTRIES AT 30 JUNE, 2020
Particulars
Ethan
Ltd Davis Ltd Debit Credit Total
Land 3,50,000 3,50,000
Vehicle 4,09,000 4,09,000
Fittings 16,950 16,950
Goodwill 3,86,080 3,86,080
11,62,030
Share capital 3,72,190 36,810 4,09,000
General reserve 1,59,250 15,750 1,75,000
Asset revaluation
surplus 1,27,400 12,600 1,40,000

5CORPORATE ACCOUNTING
Profit 23,000 23,000
BCVR 4,15,030 4,15,030
11,62,030
Worksheet entries are mainly depicted in the above table, which could help to
determine the consolidated financial statement of Ethan Ltd for the financial year of 2020.
Therefore, with the help of consolidated financial statements companies are able to depict the
accurate level of financial performance to the investors, as it accounts for each of their
investment and subsidiary operations. Hence, companies by using the information are mainly
allowing the investors to comprehend the actual level of income that has been generated
during the financial year (Hoyle, Schaefer and Doupnik 2015).
5. Explaining the step by providing the full goodwill method:
There is relevant difference between the partial and full Goodwill method that is used
for analyzing the acquisition conditions of an organization. The alterations from the partial
Goodwill system to full Goodwill system will directly affect the net identifiable assets, as the
NCI is not included in the calculations of partial Goodwill, which is needed in full Goodwill
method (Maas, Schaltegger and Crutzen 2016). The calculations that have been conducted
relatively under the partial Goodwill method would change the values of worksheet, journal
entries and business combination valuation reserve for Ethan Ltd.
Consequently, in the full goodwill method the calculations require the involvement of
NCI in subsidiary, as well as the controlling interest. This would mainly ensure that the
goodwill is acquired under non-interest participants, while companies for determining the
appropriate value use partial method. Accordingly, it would be understood that the values of

6CORPORATE ACCOUNTING
goodwill would mainly alter for Ethan ltd under full method, as compared to the partial
method (Bisogno, Santis and Tommasetti 2015).
References:
Bisogno, M., Santis, S. and Tommasetti, A., 2015. Public-Sector consolidated financial
statements: An analysis of the comment letters on IPSASB’s exposure draft no.
49. International Journal of Public Administration, 38(4), pp.311-324.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Advancing the integration of corporate
sustainability measurement, management and reporting. Journal of cleaner production, 133,
pp.859-862.
Robinson, T.R., 2020. International financial statement analysis. John Wiley & Sons.