Corporate Accounting Assignment: Business Combinations

This document presents a comprehensive solution to a corporate accounting assignment focused on business combinations, specifically analyzing the acquisition of Davis Ltd. The solution includes detailed calculations of fair values, goodwill, and non-controlling interests (NCI). It provides the necessary journal entries to record the business combination, including entries for goodwill, NCI, inventory, land, and machinery, along with explanations for each entry. The assignment also addresses the valuation of goodwill under different methods and the treatment of pre-acquisition equity. References to relevant accounting standards are implicitly present through the application of accounting principles to calculate the acquisition figures and the pre-acquisition entry. The document covers the changes in the valuation of goodwill and its impact on NCI. The solution includes a detailed discussion of the accounting treatment for changes in value and profit distribution to NCI.

Running Head: CORPORATE ACCOUNTING
CORPORATE ACCOUNTING

Running Head: CORPORATE ACCOUNTING
Table of Contents
Question 1...................................................................................................................................................3
Question 2...................................................................................................................................................3
Question 3...................................................................................................................................................4
Question 4...................................................................................................................................................6
Question 5...................................................................................................................................................6
References...................................................................................................................................................8

Running Head: CORPORATE ACCOUNTING
Question 1
Acquisition Analysis
1st July 2019
Net fair value of the identifiable
assets and liabilities of Davis Limited
Equity $ 68,000.00
General reserve $ 29,000.00
Asset Revaluation Surplus $ 23,000.00
$ 120,000.00
Inventories $ 16,100.00 23000
Land $ 32,200.00 46000
Machinery $ 37,800.00 54000
Total $ 206,100.00
Consideration Transferred $ 194,000.00
NCI $ 20,610.00
Goodwill $ (8,510.00)
Question 2
BUSINESS COMBINATION VALUATION ENTRIES
Date Particulars Debit Credit
1st July
2017 Goodwill
Dr
.
$
8,510.00
To BCVR
$
8,510.00
for goodwill recorded
Date Particulars Debit Credit
1st July
2017 General reserve
Dr
.
$
2,900.00
Share capital
$
6,800.00
Asset Revaluation
$
2,300.00
BCVR
$
8,610.00
To NCI
$
20,610.00

Running Head: CORPORATE ACCOUNTING
for entry of non-controlling interest
Date Particulars Debit Credit
1st July
2017 Inventory
Dr
.
$
23,000.00
To Deferred tax liability
$
6,900.00
To BCVR
$
16,100.00
(for inventory transferred to bcvr)
Date Particulars Debit Credit
1st July
2017 Land
Dr
.
$
46,000.00
To deferred tax liability
$
13,800.00
To BCVR
$
32,200.00
(for r and d expenses transferred)
Date Particulars Debit Credit
1st July
2017 Accumulated depreciation
Dr
.
$
14,000.00
To Machinery
$
54,000.00
TO income tax expense
$
12,000.00
Retained earnings
Dr
.
$
89,800.00
To BCVR
$
37,800.00
(for depreciation charged and adjusted against
BCVR)
Question 3
Date Particulars Debit Credit
1st July
2017 General reserve
Dr
.
$
2,900.00
Share capital
$
6,800.00
Asset Revaluation
$
2,300.00
BCVR
$
8,610.00
To NCI
$
20,610.00

Running Head: CORPORATE ACCOUNTING
for entry of non-controlling interest

Running Head: CORPORATE ACCOUNTING
Question 4
Date Particulars Debit Credit
1st July
2017 General reserve
Dr
.
$
2,900.00
Share capital
$
6,800.00
Asset Revaluation
$
2,300.00
BCVR
$
8,610.00
To NCI
$
20,610.00
for entry of non-controlling interest
30th June
2019 NCI share of profit
Dr
.
$
50.00
To NCI
$
50.00
for recording the profit on NCI
Question 5
Goodwill is that portion of the company which is an intangible value but is helpful in bringing
the business to the top position. Just the parent portion of the pre-obtaining value in Davis Ltd is
disposed of in the first pre-securing passage that additionally dispenses with the venture record
perceived by Alma Ltd. In this manner, the addition on deal buy is perceived here in the increase
account, not as a change in accordance with Retained Income as it might be the situation if the
pre-securing passage should be set up in later periods.
However, as there was an exchange during the present time frame from pre-acquisition equity,
for example an exchange from held income to general hold, the second pre-procurement section

Running Head: CORPORATE ACCOUNTING
needs to invert this exchange for the parent share. The NCI portion of this exchange will be
switched in the NCI distribution sections that manage the NCI portion of changes in value in the
present time frame. Further in step 1 to 4 the major change that can be observed is the change in
the valuation of the goodwill. Under the partial method the valuation of the goodwill is included
in the entry of non-controlling interest whereas in case of full goodwill method the goodwill is
not recorded (Grathwohl and Voeller, 2016). The first step helped in calculating the acquisition
figures and the pre-acquisition entry is recorded at 90% hence the amounts that are calculated at
90% will be changed to 100% and the share of the profit in NCI will be increased. Also in the
step 1, the amount of the NCI in included in calculation the value of the goodwill. According to
the non-controlling interest of the Davis limited the amounts are transferred to NCI in the step 4
(Grathwohl and Voeller, 2016).

Running Head: CORPORATE ACCOUNTING
References
Grathwohl, J. and Voeller, D., 2016. Full or partial goodwill recognition: An analytical
comparison/Full-Goodwill-oder Partial-Goodwill-Bilanzierung: Ein analytischer Vergleich. Die
Betriebswirtschaft, 76(2), p.147.