BAO5525 Financial Accounting: Consolidated Financial Statement

This assignment provides a comprehensive analysis of the consolidation of Dandy Ltd and its subsidiary Candy Ltd, as of June 30, 2017. It includes an acquisition analysis, consolidation journal entries, a consolidation worksheet, a consolidated income statement, and a consolidated balance sheet. The acquisition analysis details the fair value adjustments and goodwill calculation. The consolidation journal entries cover business combination valuation, pre-acquisition adjustments, sales and closing inventory transactions between the companies, profit on opening inventory, sale of plant, management fees, dividend payments, and impairment of goodwill. The consolidation worksheet presents the individual and consolidated financial data, while the income statement and balance sheet provide a clear view of the consolidated financial position and performance of Dandy Ltd. The assignment also includes a bibliography of relevant financial accounting resources.

Running head: FINANCIAL & CORPORATE ACCOUNTING
Financial and Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL AND CORPORATE ACCOUNTING
Table of Contents
Requirement a:...........................................................................................................................2
Requirement b:...........................................................................................................................2
Requirement c:...........................................................................................................................5
Requirement d:...........................................................................................................................6
Income Statement:..................................................................................................................6
Balance Sheet:........................................................................................................................7
Bibliography:..............................................................................................................................8

2FINANCIAL AND CORPORATE ACCOUNTING
Requirement a:
Particulars
Carrying
Amount Fair Value Net Fair Value
Share Capital $ 3,00,000 $ 3,00,000
Retained Earnings $ 2,00,000 $ 2,00,000
Plant $ 1,00,000 $ 1,10,000 $ 10,000
Land $ 1,20,000 $ 1,40,000 $ 20,000
Net Fair Value of
Identifiable Assets &
Liabilities $ 5,30,000
Purchase Consideration $ 6,50,000
Goodwill $ 1,20,000
Acquisition Analysis as on 1 July 2009:
Requirement b:
Dr. Cr.
Date Amount Amount
1 Business Combination Valuation Entries:
Accumulated Depreciation A/c. Dr. 30000
To, Plant A/c. $ 20,000
To, Deferred Tax Liability A/c. 3000
To, Business Combination
Valuation Reserve A/c. 7000
Depreciation Expense A/c. Dr. 1000
Retained Earnings (1/7/16) A/c. Dr. 7000
To, Accumulated Depreciation A/c. 8000
Deferred Tax Liability A/c. Dr. 2400
To, Income Tax Expense A/c. 300
To, Retained Earnings (1/7/16) A/c. 2100
Particulars
Consolidation Journal Entries

3FINANCIAL AND CORPORATE ACCOUNTING
Land A/c. Dr. $ 20,000
To, Deferred Tax Liability A/c. 6000
To, Business Combination
Valuation Reserve A/c. 14000
Goodwill A/c. Dr. $ 1,20,000
To, Business Combination
Valuation Reserve A/c. 120000
2 Pre-Acquisition Entries:
01-07-2009 Share Capital A/c. Dr. $ 3,00,000
Retained Earnings (1/7/09) A/c. Dr. $ 2,00,000
Business Combination Valuation
Reserve A/c. Dr. 150000
To, Investments in Candy Ltd. A/c. $ 6,50,000
30-06-2017 Share Capital A/c. Dr. 300000
Retained Earnings (1/7/16) A/c. Dr. 200000
Business Combination Valuation
Reserve A/c. Dr. 150000
To, Investments in Candy Ltd. A/c. 650000
3 Sale and Closing Inventory- Dandy Ltd. To Candy Ltd.:
Sales Revenue A/c. Dr. 100000
To, Cost of Goods Sold A/c. 95000
To, Inventory A/c. 5000
Deferred Tax Asset A/c. Dr. 1500
To, Income Tax Expense A/c. 1500
3 Sale and Closing Inventory- Candy Ltd. To Dandy Ltd.:
Sales Revenue A/c. Dr. 90000
To, Cost of Goods Sold A/c. 75000
To, Inventory A/c. 15000
Deferred Tax Asset A/c. Dr. 4500
To, Income Tax Expense A/c. 4500
4 Profit on Opening Inventory:
Retained Earnings (1/7/16) A/c. Dr. 7000
Deferred Tax Assets A/c. Dr. 3000
To, Cost of Sales A/c. 10000

4FINANCIAL AND CORPORATE ACCOUNTING
5 Sale of Plant:
Profit on Sale of Plant A/c. Dr. 50000
To, Plant A/c. 50000
Accumulated Depreciation A/c. Dr. 12500
To, Depreciation Expense A/c. 12500
Income Tax Expense A/c. Dr. 3750
To, Deferred Tax Assets A/c. 3750
6 Management Fees:
Management Fees Revenue A/c. Dr. 50000
To, Management Fees Expense A/c. 50000
7 Dividend Paid:
Dividends received from Candy
Ltd. A/c. Dr. 100000
To, Dividend Paid A/c. 100000
8 Impairment of Goodwill:
Retained Earnings (1/7/16) A/c. Dr. 20000
Other Expenses A/c. Dr. 6000
To, Accumulated Impairment
Losses A/c. 26000

5FINANCIAL AND CORPORATE ACCOUNTING
Requirement c:
Particulars Dandy Ltd. Candy Ltd. Dr. Cr. Consolidation
Sales Revenue $ 10,00,000 $ 7,50,000 $ 1,90,000 $ 15,60,000
Cost of Goods Sold $ 6,00,000 $ 3,00,000 $ 1,80,000 $ 7,20,000
Gross Profit $ 4,00,000 $ 4,50,000 $ 8,40,000
Other Revenue
Dividends from Candy Ltd. $ 1,00,000 $ 1,00,000 $ 0
Management Fee Rev. $ 50,000 $ 50,000 $ 0
Profit - Sale of Plant $ 50,000 $ 50,000 $ 0
Expenses
Administrative Expenses $ 30,000 $ 40,000 $ 70,000
Depreciation $ 30,000 $ 80,000 $ 1,000 $ 12,500 $ 98,500
Management Fee Expenses $ 50,000 $ 50,000 $ 0
Other Expenses $ 1,50,000 $ 80,000 $ 6,000 $ 2,36,000
Profit before Tax $ 3,90,000 $ 2,00,000 $ 4,35,500
Tax Expenses $ 87,000 $ 75,000 $ 6,300 $ 1,55,700
Profit for the year $ 3,03,000 $ 1,25,000 $ 2,79,800
Retained Earnings 30/6/16 $ 4,00,000 $ 3,25,000 $ 2,34,000 $ 2,100 $ 4,93,100
$ 7,03,000 $ 4,50,000 $ 7,72,900
Dividends Paid $ 1,53,000 $ 1,00,000 $ 1,00,000 $ 1,53,000
Retained Earnings 30/6/17 $ 5,50,000 $ 3,50,000 $ 6,19,900
BALANCE SHEET
Shareholders Equity
Retained Earnings $ 5,50,000 $ 3,50,000 $ 6,19,900
Share Capital $ 5,00,000 $ 3,00,000 $ 3,00,000 $ 5,00,000
BCVR $ 1,50,000 $ 1,41,000 ($ 9,000)
Current Liabilities
Accounts Payable $ 2,10,000 $ 2,10,000
Tax Payable $ 1,40,000 $ 40,000 $ 1,80,000
Deferred Tax Liabilities $ 2,400 $ 9,000 $ 6,600
Non-Current Liabilities
Loans $ 3,10,000 $ 4,20,000 $ 7,30,000
Total Equities & Liabilities $ 15,00,000 $ 13,20,000 $ 22,37,500
Current Assets
Accounts Receivable $ 50,000 $ 70,000 $ 1,20,000
Inventory $ 1,50,000 $ 4,50,000 $ 20,000 $ 5,80,000
Non-Current Assets
Deferred Tax Assets $ 9,000 $ 9,000
Land & Buildings $ 3,00,000 $ 5,00,000 $ 20,000 $ 8,20,000
Plant at Cost $ 4,50,000 $ 5,00,000 $ 70,000 $ 8,80,000
Accumulated Depreciation ($ 1,00,000) ($ 2,00,000) $ 42,500 $ 8,000 ($ 2,65,500)
Invetsment in Candy Ltd. $ 6,50,000 $ 6,50,000 $ 0
Goodwill $ 1,20,000 $ 1,20,000
Accum. Impairment Losses $ 26,000 ($ 26,000)
Total Assets $ 15,00,000 $ 13,20,000 $ 12,74,900 $ 12,74,900 $ 22,37,500
Eliminations
Consolidation Worksheet

6FINANCIAL AND CORPORATE ACCOUNTING
Requirement d:
Income Statement:
Pariculars Amount
Sales Revenue $ 15,60,000
Cost of Goods Sold ($ 7,20,000)
Gross Profit $ 8,40,000
Expenses:
Administrative Expenses ($ 70,000)
Depreciation ($ 98,500)
Other Expenses ($ 2,36,000)
Profit Before Tax $ 4,35,500
Tax Expenses ($ 1,55,700)
Net Profit for the period $ 2,79,800
In the books of Dandy Ltd.
Consolidated Income Statement
for the period ending 30 June 2017

7FINANCIAL AND CORPORATE ACCOUNTING
Balance Sheet:
Particulars Amount
ASSETS:
Current Assets
Accounts Receivable $ 1,20,000
Inventory $ 5,80,000
Total Current Assets $ 7,00,000
Non-Current Assets
Deferred Tax Assets $ 9,000
Land & Buildings $ 8,20,000
Plant at Cost $ 8,80,000
Accumulated Depreciation ($ 2,65,500)
Goodwill $ 1,20,000
Accum. Impairment Losses ($ 26,000)
Total Non-Current Assets $ 15,37,500
TOTAL ASSETS $ 22,37,500
LIABILITIES
Current Liabilities
Accounts Payable $ 2,10,000
Tax Payable $ 1,80,000
Deferred Tax Liabilities $ 6,600
Total Current Liabilities $ 3,96,600
Non-Current Liabilities
Loans $ 7,30,000
Total Non-Current Liabilities $ 7,30,000
TOTAL LIABILITIES $ 11,26,600
NET ASSETS $ 11,10,900
SHAREHOLDERS EQUITY
Share Capital $ 5,00,000
Retained Earnings $ 6,19,900
Business Combination Valuation
Reserve ($ 9,000)
TOTAL SHAREHOLDERS EQUITY $ 11,10,900
In the books of Dandy Ltd.
Consolidated Balance Sheet
as on 30 June 2017

8FINANCIAL AND CORPORATE ACCOUNTING
Bibliography:
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.