Corporate Accounting and Reporting: Acquisition and Goodwill Analysis

This report provides a detailed analysis of corporate accounting and reporting, focusing on business combinations, acquisition analysis, and goodwill. It includes a table of contents, followed by an examination of acquisition analysis, detailing the net fair value of identifiable assets and liabilities, consideration transferred, and goodwill calculation. The report then presents business combination valuation entries, pre-acquisition entries, and journal entries for recognizing non-controlling interests (NCI). Worksheet entries and an explanation of goodwill are also included, clarifying its role as an intangible asset and the methods for its calculation. The report concludes with references, offering a comprehensive overview of corporate accounting practices.

Running Head: CORPORATE ACCOUNTING AND REPORTING
CORPORATE ACCOUNTING AND REPORTING

Running Head: CORPORATE ACCOUNTING AND REPORTING
Table of Contents
Acquisition Analysis..................................................................................................................3
Business combination valuation entries.....................................................................................3
Pre-Acquisition Entry.................................................................................................................4
Journal entry of recognize NCI..................................................................................................5
Worksheet entries.......................................................................................................................5
Explanation of Goodwill............................................................................................................6
References..................................................................................................................................7

Running Head: CORPORATE ACCOUNTING AND REPORTING
Acquisition Analysis
At 1st June 2019
Net fair value of the identifiable
assets and liabilities of Davis Limited
Equity $ 7,41,000.00
Retained earnings $ 2,54,000.00
Asset Revaluation Surplus $ 3,18,000.00
$ 13,13,000.00
Inventories $ 1,77,800.00
Land $ 3,55,600.00
Equipment $ 4,15,100.00
Net identifiable assets $ 22,61,500.00
Consideration Transferred $ 21,18,000.00
$ 2,03,535.00
Goodwill $ 60,035.00
Business combination valuation entries
Date Particulars Debit Credit
30th June
2020 Accumulated depreciation
D
r.
$
1,48,000.0
0
Gain on Equipment
$
4,45,000.0
0
To deferred tax liability
$
44,400.00
To business combination valuation reserve
$
5,48,600.0
0
(for depreciation charged and adjusted
against BCVR)
30th June
2020 Depreciation Expense
D
r.
$
1,48,250.0
0
To accumulated Depreciation
$
1,48,250.0
0
(for depreciation transferred to

Running Head: CORPORATE ACCOUNTING AND REPORTING
accumulated depreciation)
30th June
2020 Land
D
r.
$
5,08,000.0
0
To deferred tax liabilities
$
1,52,400.0
0
To BCVR
$
3,55,600.0
0
(For adjustments made)
30th June
2020 Inventories A/c
D
r.
$
2,54,000.0
0
To deferred tax liabilities
$
76,200.00
To BCVR
$
1,77,800.0
0
(For adjustments made)
30th June
2020 Goodwill
D
r.
$
60,035.00
To BCVR
$
60,035.00
For goodwill recorded
Pre-Acquisition Entry
Acquisition
Analysis
Pre-Acquisition Entries
1st July 2019 Retained earnings (1/7/19)
D
r.
$
12,29,120.00
Share Capital
D
r.
$
6,81,720.00
Asset Revaluation surplus
D
r.
$
2,44,720.00
BCVR
$ -
22,475.00
To gain on bargain purchase
$
60,035.00
To shares in Davis Limited $

Running Head: CORPORATE ACCOUNTING AND REPORTING
21,18,000.00
(for consideration given to Davis
limited)
30th June 2020 Transfer from valuation Reserve
D
r.
$
10,82,000.00
To General reserve
$
10,82,000.00
for transferred from BCVR to
BCVR
Capital Reserve
D
r.
$
22,475.00
To BCVR
$
22,475.00
for amount transferred to BCVR
Journal entry of recognize NCI
Date Particulars Debit Credit
Entry of
NCI Retained Earnings (1/7/19)
D
r.
$
1,20,240.00
Share Capital
D
r.
$
66,690.00
Asset Revaluation surplus
$
28,620.00
To shares in Davis Limited
$
2,15,550.00
for entry for non-controlling assets
entry passed
Worksheet entries
30th June
2020 Profit and loss A/c
D
r.
$
3,78,850.00
To depreciation on plant
$
1,48,250.00
To depreciation on fittings
$
2,000.00
to deferred tax liability
$
2,28,600.00
for recording the expenses in profit and
loss account

Running Head: CORPORATE ACCOUNTING AND REPORTING
30th June
2020 Capital A/c
D
r.
$
44,000.00
To profit and loss a/c
$
44,000.00
for recording the net profit
Explanation of Goodwill
Goodwill is an intangible asset that is recorded to give a business effect in the transactions.
Its value can only be felt in terms of the brand value. Further assigning a number value on
goodwill can be difficult. This happens to be the new method when one of the firms acquires
another firm, the firm of the parent company. As per the accounting methods there are two
methods to calculate goodwill exist and such are the partial goodwill methods as well as the
full goodwill method. The general formula to calculate the value of the goodwill is the
amount of the consideration and amount of NCI, fair value of the previous equity interests
and net identifiable assets.
Business mixes are administered by ASC 805, wherein the valuation of the assets and the
liabilities just as any non-controlling interests that are gained as a component of the
exchange. As a major aspect of a business blend, where the valuation is done of property,
individual property, immaterial resources, for example, trademarks, innovation and client
connections. In specific circumstances, the inventory and the deferred revenue is also taken
into the consideration. (NCI) is ownership of a company and the shareholders are not allowed
to access the full control of the company. This control can mean that the operations are
controllable especially in case of the subsidiary company. Usually the control can be gained
if the rights worth 50% are acquired. This means that any position that holds 50% or less of
and is deemed to be a non-controlling interest (CAAA, 2019).
A non-controlling interest (NCI), otherwise called minority intrigue, where the shareholders
of the existing company holds the less number of the shareholding or say less than 50% and

Running Head: CORPORATE ACCOUNTING AND REPORTING
has no influence over the decisions. Non-controlling interests are identified on the basis of
substances and don't represent potential democratic rights. Shareholders of open
organizations today would be held responsible for acquiring NCI, with even a 5% to 10%
value stake viewed as a huge holding in a solitary organization. In the present scenario the
non-controlling interest of Alma Limited is only 9%, and the major difference that can be
found in the two methods from step 1 to 4 is that in the partial goodwill method, the goodwill
is claimed only for the authority of the assets and the liabilities, the company has whereas in
case of the full goodwill method the non-controlling interest also includes goodwill unlike in
the partial method. The value will be recorded at 100% and the shares will be distributed
accordingly (CAAA, 2019).

Running Head: CORPORATE ACCOUNTING AND REPORTING
References
CAAA, (2019)CHOOSE YOUR METHOD OF ACCOUNTING FOR GOODWILL IN A
COMBINATION [Online] Available from https://www.caaa.biz/choose-method-accounting-
goodwill-combination/ [Accessed on 19th September 2019].