Corporate Accounting Assignment: Consolidation, NCI, and Liquidation

This document presents a comprehensive solution to a corporate accounting assignment, addressing key concepts such as consolidation, non-controlling interest (NCI), and liquidation. The assignment begins by exploring the accounting treatment of an investment in a subsidiary, comparing the cost method and the equity method. It then delves into the preparation of consolidated financial statements, including detailed journal entries for adjustments related to dividends, gain on sale of motor vehicles, depreciation, unrealized profits in inventory, and deferred tax implications. A consolidation worksheet is provided, along with acquisition analysis and the calculation of NCI at different points in time. The solution also covers a business combination valuation, including fair value adjustments, goodwill calculation, and the pre-acquisition entry. Furthermore, the assignment includes a liquidation scenario, presenting a liquidation account, a liquidator's statement of receipts and payments, and a shareholders' distribution account. Finally, the document provides a detailed explanation of non-controlling interest, its calculation, and its presentation in consolidated financial statements, referencing relevant accounting standards and resources.

CORPORATE ACCOUNTING 1
CORPORATE ACCOUNTING

CORPORATE ACCOUNTING 2
Question 1:
A
)
If Bolan dos not prepare Consolidated financial
statements, investment in Rex Ltd is to be recognised at
Cost or in accordance with AASB9
NCI calculation
Share Capital
3,
00,0
00
Retained Earnings (30/06/20)
60,2
40
3,
60,2
40
NCI - 60%
2,
16,1
44
B
)
If Bolan prepares Consolidated financial statements,
investment in Rex Ltd is to be recognised under Equity
method
Journal Entries
Dr. Cr.

CORPORATE ACCOUNTING 3
Dividend A/c
8,64
0
Investment in Rex Ltd.
8,6
40
(Elimination of Dividend = 40% of (9600+12000)
Gain on Sale of Motor Vehicle A/c
2,
880.
00
Investment in Rex Ltd
2,
880
.00
(Elimination of Gain on Sale of Motor Vehicle = 40% of
(28800-21600)
Retained Earnings
576.
00
Investment in Rex Ltd
576
.00
(Adjustment of Depreciation on Motor Vehicle =40% of
(43200*.2-4320-2880)

CORPORATE ACCOUNTING 4
Tax Expense
1,
036.
80
Deferred Tax
1,
036
.80
(Tax Impact on Difference in Carrying Value of Motor
Vehicle)
Investment in Rex Ltd.
768.
00
Retained Earnings
768
.00
(Elimination of Unrealised Profit in Opening Inventor of
Rex Ltd)
Tax Expense
230.
40
Deferred Tax
230
.40
(Tax impact on Unrealised Profit in Opening Inventory)

CORPORATE ACCOUNTING 5
Cost of Goods Sold
1,
536.
00
Inventory
1,
536
.00
(Elimination of Unrealised Profit in Closing Inventory of
Bolan Ltd)
Deferred Tax
460.
80
Tax Expense
460
.80
(Tax impact on Unrealised Profit in Closing Inventory
Inventory)
NCI calculation
Share Capital
3,
00,0
00
Retained Earnings (30/06/20)

CORPORATE ACCOUNTING 6
60,2
40
Add: Dividend
21,6
00
3,
81,8
40
NCI - 60%
2,
29,1
04
Question 2:
Consolidation Worksheet Journal Entries at 30 June
2019
Retained Earnings Dr.
5,6
00
Accumulated Depreciation Cr.
5,6
00
(Dep on Plant for the year 30 June 2018)
Deferred Tax Dr. 1,6

CORPORATE ACCOUNTING 7
80
Retained Earnings Cr.
1,6
80
(Reversal of Deferred Tax recognised on Plant FV)
Depreciation expense Dr.
2,8
00
Accumulated Depreciation Cr.
2,8
00
(Dep on Plant from 1 July 2018 to 31 Dec 2018)
Deferred Tax Dr.
8
40
Income Tax Expense Cr.
8
40
(Reversal of Deferred Tax recognised on Plant FV)
Retained earnings Dr.
2,6
25
Cost of Goods Sold Cr.
2,6
25
(Elimination of Unrealised Profit in Opening Inventory)
Income Tax Expense Dr.
7
88
Deferred tax Cr. 7

CORPORATE ACCOUNTING 8
88
(Reversal of Deferred Tax on Unrealised Profit in Op.
Invetory)
Dividend Paid Dr.
32,5
50
Dividend Received Cr.
32,5
50
(Elimination of Dividend)
Acquisition Analysis
Equity of Clock Ltd
Share Capital
2,80,0
00
General reserve
1,12,0
00
Retained earnings
56,0
00
a
4,48,0
00
Fair Value Adjustments
Land
22,4
00
Plant 28,0

CORPORATE ACCOUNTING 9
00
Inventory
35,0
00
Accounts receivable
-
7,000
Goodwill
-
5,600
b
72,8
00
Tax Impact on FV adjustments c=b*30%
-
21,840
Fair Value of Net Assets a+b+c
4,98,9
60
75% Shares acquired by Ormolu d
3,74,2
20
Consideration Paid e
3,30,9
60
Gain on bargain purchase d-e
43,2
60
NCI share of equity - 25%
(a+b+c)*25
%
1,24,7
40
Business Combination Valuation Entries
Land A/c Dr.
22,4
00
Plant A/c Dr. 28,0

CORPORATE ACCOUNTING 10
00
Inventory A/c Dr.
35,0
00
Accounts receivable A/c Cr.
7,0
00
Goodwill A/c Cr.
5,6
00
Deferred Tax A/c Cr.
21,8
40
Business Combination Valuation Reserve A/c Cr.
50,9
60
Pre-acquisition Entry
Share Capital A/c Dr.
2,10,0
00
General Reserve A/c Dr.
84,0
00
Retained Earnings A/c Dr.
42,0
00
Business Combination Valuation Reserve A/c Dr.
38,2
20
Investment in Clock Ltd. Cr.
3,30,9
60
Gain on Bargain Purchase Cr.
43,2
60
(For acquiring 75%)

CORPORATE ACCOUNTING 11
Non-Controlling Interest
On the Acquisition Date
Fair Value of Net Assets
4,98,9
60
NCI - % 25%
1,24,7
40
Non-Controlling Interest
On 1 July 2018
Fair Value of Net Assets on 1 July 2017
4,98,9
60
Add: Profit for the year
1,82,0
00
Less: Dividend Paid
-
11,200
Less: Dividend Declared
-
21,000
Less: Additional Depreciation on Plant
-
5,600
Add: Tax on Additional Depreciation
1,6
80
6,44,8
40
NCI - % 25% 1,61,2

CORPORATE ACCOUNTING 12
10
Non-Controlling Interest
On 30 June 2019
Fair Value of Net Assets on 1 July 2018
6,44,8
40
Add: Profit for the year
2,10,0
00
Less: Additional Depreciation on Plant till 31 Dec 2018
-
2,800
Add: Tax on Additional Depreciation
8
40
Less: Dividend Paid
-
22,400
8,30,4
80
NCI - % 25%
2,07,6
20
Question 3:
Liquidation A/c
Particulars Amou Particulars Amou