Corporate Accounting Assignment - Finance Module: Alma vs Davis

This assignment analyzes the acquisition of Davis Ltd by Alma Ltd, focusing on corporate accounting principles. It includes a detailed acquisition analysis, examining the fair value of identifiable assets and liabilities, and calculating goodwill. The solution provides combination entries, including pre-acquisition entries and entries for non-controlling interests (NCI). Worksheet entries are presented to adjust for depreciation, land, and inventories. The assignment also discusses the changes in the full goodwill method versus the partial goodwill method, highlighting the impact on goodwill calculation and profit sharing. Relevant journal entries are provided to illustrate the accounting treatment of the acquisition and consolidation process, offering a comprehensive understanding of the financial implications.

Running Head: CORPORATE ACCOUNTING 1
CORPORATE ACCOUNTING

Running Head: CORPORATE ACCOUNTING
Table of Contents
Acquisition Analysis.....................................................................................................................................3
Combination Entries....................................................................................................................................3
Non-Controlling Entries...............................................................................................................................4
Worksheet Entries.......................................................................................................................................4
Changes in the step 1-4...............................................................................................................................6

Running Head: CORPORATE ACCOUNTING
Acquisition Analysis
Acquisition Analysis
At 1st June 2019
Net fair value of the identIfiable
assets and liabilities of Davis Limited FAIR VALUE- CARRYING AMOUNT
Equity
$
1,007,000.00
Retained earnings
$
432,000.00
Asset Revaluation Surplus
$
345,000.00
$
1,784,000.00
Inventories
$
242,200.00 346000
Land
$
483,000.00 690000
Vehicle
$
564,200.00 806000
Net identifiable assets
$
3,073,400.00
Consideration Transferred
$
2,878,000.00
$
245,872.00
Goodwill
$
50,472.00
Combination Entries
Pre Acquistion
Entries
1st July 2019 Retained earnings (1/7/19)
Dr
.
$
946,891.40
Share Capital
Dr
.
$
916,370.00
Asset Revaluation surplus
Dr
.
$
313,950.00
Capital reserve Dr $

Running Head: CORPORATE ACCOUNTING
. 751,260.60
To gain on bargain purchase
$
50,472.00
To shares in Davis Limited
$
2,878,000.00
(for consideration given to Davis limited)
30th June
2020 Transfer from valuation Reserve
Dr
.
$
608,540.00
To retained earnings
$
608,540.00
for transferred from BCVR to BCVR
Retained Earnings
$
751,260.60
To capital reserve
$
751,260.60
for amount transferred to capital reserve
Entry of NCI Retained earnings (1/7/19)
Dr
.
$
93,648.60
Share Capital
Dr
.
$
90,630.00
Asset Revaluation surplus
$
31,050.00
To shares in Davis Limited
$
215,328.60
for entry for non controlling assets entry
passed
Non-Controlling Entries
Entry of NCI Retained earnings (1/7/19)
Dr
.
$
93,648.60
Share Capital
Dr
.
$
90,630.00
Asset Revaluation surplus
$
31,050.00
To shares in Davis Limited
$
215,328.60
for entry for non controlling assets entry
passed

Running Head: CORPORATE ACCOUNTING
Worksheet Entries
Date Particluars Debit Credit
30th June
2020 Accumulated depreciation
Dr
.
$
201,000.00
To vehicle
$
39,800.00
To deferred tax
liability
$
60,300.00
To business combination valuation reserve
$
100,900.00
(for depreciation charged and adjusted against
BCVR)
30th June
2020
Depreciation
Expense
Dr
.
$
161,200.00
To accumulated Depreciation
$
161,200.00
(for depreciation transferred to accumulated
depreciation)
30th June
2020 Land
Dr
.
$
483,000.00
30th June
2020 To deferred tax liabilities
Dr
.
$
144,900.00
To BCVR
$
338,100.00
(For adjustments
made)
30th June
2020 Inventories A/c
Dr
.
$
242,200.00
To deferred tax liabilities
$
72,660.00
To BCVR
$
169,540.00
(For adjustments
made)
30th June
2020 Profit and loss A/c
Dr
.
$
382,760.00
To depreciation on
plant
$
161,200.00
To depreciation on fittings
$
4,000.00
to deferred tax
liability
$
217,560.00
for recording the expenses in profit and loss

Running Head: CORPORATE ACCOUNTING
account
30th June
2020 Capital A/c
Dr
. 58000
To profit and loss
a/c 58000
for recording the net profit
Changes in the step 1-4
As per the IFRS there is only full goodwill method where the goodwill is recognized completely
by acquirer. Whereas there is one more method which is known as partial goodwill method that
records the difference between the purchase consideration and the fair value of the share. In the
case of the partial goodwill method the change happens only in case of the goodwill share of the
acquirer. The goodwill under the full goodwill method exceeds the goodwill under the partial
goodwill method. In step one the acquisition analysis is taken into consideration by taking the
factor of the non-controlling interest. In this scenario the goodwill is calculated at 91%, whereas
in case of the full goodwill method the values would have recorded at 100%. In the step 4 the
share of the profit will be changed accordingly.