Corporate Accounting: Consolidation Journal & Worksheet Solution

This document presents a detailed solution to a corporate accounting assignment centered on the consolidation of financial statements. It includes a series of consolidation journal entries addressing various intercompany transactions, such as dividends, inventory transfers, and asset sales. The solution also features a comprehensive consolidation worksheet, integrating the financial statements of the parent and subsidiary companies to derive consolidated figures. Furthermore, the document provides the consolidated profit and loss statement, statement of equity, and balance sheet, offering a complete picture of the consolidated financial position. Working notes are included to demonstrate the calculations of net fair value and goodwill. This assignment is a great resource for students studying corporate accounting, covering key concepts like consolidation, intercompany eliminations, and the preparation of consolidated financial statements.

RUNNING HEAD: CORPORATE ACCOUNTING
CORPORATE ACCOUNTING

CORPORATE ACCOUNTING 1
Contents
Q1. Consolidation journal entries..........................................................................................................2
Q2. Consolidation Worksheet................................................................................................................4

CORPORATE ACCOUNTING 2
Q1. Consolidation journal entries
Particulars
Debit
($)
Credit
$)
Dividend Revenue A/c Dr 5000
To Interim Dividend paid A/c 5000
(Being interim dividend received to Ghostbusters Ltd)
Dividend payable A/c Dr 4000
To Final Dividend Declared A/c 4000
(Being final declared by Bat Ltd)
Dividend Revenue A/c Dr 4000
To Dividend receivable A/c 4000
(Being final receivable by Ghostbusters Ltd)
Retained Earnings A/c Dr 2800
Income tax expense A/c Dr 1200
To Cost of sales A/c 4000
(Being inventories transfer to Bat Ltd)
Gain on sale of inventory A/c Dr 5000
To Inventory A/c 5000
(Being inventory sold to Ghostbusters ltd on profit )
Deferred tax asset A/c Dr 1500
To income tax expense A/c 1500
(Being income tax charged to Bat Ltd)
Sales A/c Dr 8000
To Cost of sales A/c 7000
To Inventory A/c 1000
(Being inventory sold)
Deferred tax asset A/c Dr 300
To income tax expense A/c 300
(Being income tax charged to Ghostbusters Ltd)
Sales A/c Dr 18000
To Cost of sales A/c 16000
To Inventory A/c 2000
(Being inventory sold)
Deferred tax asset A/c Dr 600
To income tax expense A/c 600
(Being income tax charged to Ghostbusters Ltd)
Retained Earnings A/c Dr 700
Deferred tax asset A/c Dr 300
To Furniture A/c 1000
(Being furniture transfer to Bat Ltd)
Accumulated Depreciation - Furniture A/c Dr 150
To Depreciation A/c 100
To Retained Earnings A/c 50

CORPORATE ACCOUNTING 3
(Being depreciation charged)
Income tax expense A/c Dr 30
Retained Earnings A/c Dr 15
To Deferred tax asset A/c 45
Land A/c Dr 5000
To loss on sale of land A/c 5000
(Being land sold to Bat Ltd for loss)
Income tax expense A/c Dr 1500
To Deferred tax liability A/c 1500
Loan from Ghostbusters A/c Dr 12000
To Loan to Bat A/c 12000
(Interest free loan given to Bat Ltd)
Gain on sale of Land A/c Dr 20000
To income tax expense A/c 6000
To transfer from business combination valuation reserve A/c 14000
Trademark A/c Dr 10000
To Deferred tax liability A/c 3000
To transfer from business combination valuation reserve A/c 7000
Accumulated Depreciation - Plant and Equipment A/c Dr 114000
To plant and Equipment A/c 110000
To Deferred tax liability A/c 1200
To transfer from business combination valuation reserve A/c 2800
Depreciation Expense- Plant and Equipment A/c Dr 800
Retained Earnings A/c Dr 800
To Accumulated Depreciation - Plant and Equipment A/c 1600
Deferred tax liability A/c Dr 480
To income tax expense A/c 240
To Retained Earnings A/c 240
Depreciation Expense- Machinery A/c Dr 125
Gain on sale of machinery A/c Dr 625
Retained Earnings A/c Dr 175
To income tax expense A/c 225
To transfer from business combination valuation reserve A/c 700
Retained Earnings A/c (1/7/18)
Dr 45000
Share Capital A/c Dr 200000
General reserve A/c Dr 25000
Business combination valuation reserve A/c Dr 31500
Goodwill A/c Dr 28500
To Share in Bat Ltd 330000
(Being pre-acquisition entry on 30/6/18)
Retained Earnings A/c (1/7/19) Dr 52000
Share Capital A/c Dr 200000
General reserve A/c Dr 25000
Business combination valuaton reserve A/c Dr 24500
Goodwill A/c Dr 28500

CORPORATE ACCOUNTING 4
To Share in Bat Ltd 330000
(Being pre-acquisition entry on 30/6/20)
Transfer from business combination valuation reserve A/c Dr 14700
To Business combination valuation reserve A/c 14700
Share in Bat Ltd Dr 5000
To Interim Dividend paid A/c 5000
Q2. Consolidation Worksheet
Financial
Statements
Ghost Bat Adjustments Group
Ltd Ltd Dr Cr
Sales revenue 220000 182000 26000 376000
Other income 62000 20000 9000 73000
282000 202000 449000
Cost of sales 162000 128000 27000 263000
Other expenses 53000 41000 925 100 94825
215000 169000 357825
Trading profit 67000 33000 91175
Gains/losses on
sale of non-current
assets
22000 25000 25625 5000 26375
Profit before tax 89000 58000 117550
Tax expense 20000 18000 2730 8865 31865
Profit 69000 40000 85685
Retained earnings 30000 45000 56490 290 18800
(1/7/19)
Transfer from BCV
reserve 0 0 14700 14700 0
99000 85000 104485
Dividend paid 12000 10000 10000 12000
Dividend declared 6000 4000 4000 6000
18000 14000 18000
Retained earnings 81000 71000 86485
(30/6/20)

CORPORATE ACCOUNTING 5
Share capital 312000 200000 200000 312000
General reserve 20000 25000 25000 20000
BCVR - - 9800 9800
Total Equity 413000 296000 418485
Deferred tax
liabilities 0 0 480 5700 5220
Dividend payable 6000 4000 4000 6000
Current tax liability 8000 2500 10500
Loan from Ghost
Ltd 0 12000 12000 0
Provisions 78000 169500 247500
Total Liabilities 92000 188000 269220
Total Liabilities +
Equity 505000 484000 687705
Consolidated Profit and Loss statement for Ghostbusters ltd
For the year ended 30-06-2020
Particulars Amount ($)
INCOMES (A)
Sales Revenue 376000
Other Income 73000
TOTAL (A) 449000
EXPENSES (B)
Cost of Sales 263000
Other Expenses 94825
TOTAL (B) 357825
Trading Profit (A-B) 91175
Gains/(losses) on non-current assets 26375
Profit Before Tax 117550
Less: Tax Expenses 31865
Profit after Tax 85685
Consolidated Statement of Equity for Ghostbusters ltd
For the year ended 30-06-2020
Particulars Amount ($)
Retained Earnings
Opening Retained earnings 18800

CORPORATE ACCOUNTING 6
Add: Profit after tax 85685
Less: Dividend paid 12000
Less: Dividend declared 6000
Closing Retained earnings 86485
Share Capital 312000
General Reserve 20000
Consolidated Balance Sheet for Ghostbusters ltd
As at 30-06-2020
Particulars Amount ($) Amount ($)
ASSETS
Non-Current Assets
Plant And Equipment 303000
Less: Accumulated Depreciation 35600 267400
Machinery 30000
Less: Accumulated Depreciation 4000 26000
Furniture 14000
Less: Accumulated Depreciation 2850 11150
Trademark 110000
Goodwill 53500
Deferred tax assets 12855
Land 80000
Total Non-current assets 560905
Current Assets
Cash 42800
Receivables 22000
Inventories 62000
Total Current assets 126800
TOTAL ASSETS (A) 687705
LIABILITIES
Non-Current Liabilities
Deferred tax liabilities 5220
Total Non-current liabilities 5220
Current Liabilities
Provisions 247500
Current tax liabilities 10500
Final Dividend payable 6000
Total Current liabilities 264000
TOTAL LIABILITIES (B) 269220
NET ASSETS (A-B) 418485
OWNER'S EQUITY
Share Capital 312000
General reserve 20000
Retained Earnings 86485

CORPORATE ACCOUNTING 7
TOTAL OWNER'S EQUITY 418485
Working Notes:
1. Calculation of Net fair value of Bat Ltd:
Particulars Amount ($)
EQUITY
Share Capital 200000
General Reserve 25000
Retained Earnings 45000
Total 270000
ASSETS
Plant and Equipment (net of tax) 2800
Trademark (net of tax) 7000
Inventories (net of tax) 7000
Land (net of tax) 14000
Machinery (net of tax) 700
Total 31500
Net value (A+B) 301500
Less: Goodwill given 25000
Net fair value 276500
2. Calculation of Goodwill:
Particulars Amount ($)
Net fair value 276500
Cost of Acquisition 305000
Cost of Goodwill acquired 28500