Corporate Accounting & Reporting 1: Acquisition Analysis Project

This assignment presents a comprehensive analysis of the acquisition of Darren Ltd by Ethan Ltd, focusing on corporate accounting and reporting. The solution includes a detailed acquisition analysis, computation of assets taken over, and valuation of the business combination. It provides calculations for goodwill, considering factors like share capital, retained earnings, and asset revaluation. The assignment also features pre-acquisition and adjustment worksheet journals, including entries for cost of sales, machinery, business combination, and income statement adjustments. The provided solution addresses the assignment brief's requirements by presenting consolidated financial statements and all the necessary calculations in an organized manner.

CORPORATE ACCONTING & REPORTING

Accounting
1. Presentation of Acquisition analysis
Computation of Assets taken over
1.7.17 30.6.18
Share Capital 54,000.00 54,000.00
Retained Earnings 36,000.00 44,300.00
Asset Revaluation Reserve 18,000.00 20,000.00
Inventory revaluation 1,400.00 140.00
Machinery revaluation 1,050.00 840.00
Total 1,10,450.00 1,19,280.00
Post Acquisition Profit 8,830.00
Payment of consideration 1,10,000.00 1,10,000.00
Goodwill on Acquisition
-450.00
In our calculation it is seen that there is a net gain on such acquisition of $450 and net fair
value of assets acquired is $110450 and consideration paid is $110000. There is deferred
consideration as all the amount is paid upfront and no other liability is to be paid after date of
acquisition. It is assumed the consideration paid for purchase is given in cash or via bank or
in equity shares of Ethan Ltd as we do have any information about opening share capital of
Ethan Ltd nor any other mode of payment of purchase consideration.
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Accounting
2. Valuation of Business combination
Ethan Ltd
Consolidated Financial Statements as at 30.6.18
Ethan Ltd Darren ltd
Consolidate
d
Share Capital 3,60,000.00 54,000.00 3,60,000.00
Retained Earning 1,44,000.00 41,300.00 2,450.00
General Reserve 10,000.00 3,000.00 10,000.00
Asset Revaluation Surplus 18,500.00 20,000.00 18,500.00
Liabilities 42,500.00 13,000.00 55,500.00
Total 5,75,000.00
1,31,300.0
0 4,46,450.00
Goodwill(Business Combination Valuation
Reserve)
-
450.00
Land 1,60,000.00 20,000.00 1,80,000.00
Plant and Machinery 3,60,000.00
1,25,600.0
0 4,86,440.00
Depreciation
-
1,10,000.00
-
33,000.00
-
1,43,000.00
Inventory 55,000.00 18,700.00 73,840.00
Shares in Darren Ltd 1,10,000.00 -
5,75,000.00
1,31,300.0
0 5,96,830.00
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Accounting
3. Pre- Acquisitions “ worksheet Journals
Adjustments
Cost of Sales Ac Dr 300
To, Machinery AC 300
Business Combination Entries
Share Capital 54000
Retained Earnings 36000
Asset Revaluation Reserve 18000
Revaluation Reserve 2450
To shares of Darren Ltd 1,10,000.00
To Gain on Business Purchase 450
Income Statement
Ethan Ltd Darren ltd
PBT 1,20,000.00 12,500.00
Tax Expense -56,000.00 -4,200.00
Profit 64,000.00 8,300.00
Retained Earning 80,000.00 36,000.00
Transferred to General reserve - -3,000.00
Closing Retained Earning 1,44,000.00 41,300.00
Adjustments
Subsidiary Share 8,830.00 (119280-110450)
Total 1,52,830.00
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