Finance Assignment: Acquisition Analysis, NCI and Consolidation

This finance assignment solution provides a comprehensive analysis of acquisition accounting, business combination valuation, and the treatment of Non-Controlling Interest (NCI). It includes pre-acquisition entries, business combination valuation entries, and journal entries to recognize NCI. The solution also features consolidation worksheet entries and a clear explanation of the differences between the partial goodwill method and the full goodwill method. The assignment covers adjustments for depreciation, land, inventories, and cost of sales, along with their impact on deferred tax liabilities and the business combination valuation reserve. The document also explains the impact of the different methods and how they affect the balance sheet and profit and loss account. The provided solution is a valuable resource for students studying financial accounting and consolidation.

Running head: FINANCE 1
FINANCE

Running head: FINANCE
Table of Contents
Entries of Acquisition analysis....................................................................................................................3
Business combination valuation entries.......................................................................................................3
Journal entry to recognize NCI....................................................................................................................4
Consolidation worksheet entries..................................................................................................................4
Difference from partial goodwill method to full goodwill method..............................................................5
References...................................................................................................................................................6

Running head: FINANCE
Entries of Acquisition analysis
Pre-Acquisition
Entries
1st July
2019
General Reserve
(1/7/19)
Dr
.
$
391,017.90
Share Capital
Dr
.
$
292,110.00
Asset Revaluation surplus
Dr
.
$
97,370.00
Capital reserve
Dr
.
$
132,545.10
To gain on bargain purchase
$
23,043.00
To shares in Davis Limited
$
890,000.00
(for consideration given to Davis
limited)
30th June
2020 Transfer from valuation Reserve
Dr
.
$
295,690.00
To retained earnings
$
295,690.00
for transferred from BCVR to BCVR
General Reserve
$
132,545.10
To capital reserve
$
132,545.10
for amount transferred to capital
reserve
Business combination valuation entries
Date Particulars Debit Credit
30th June
2020 Accumulated depreciation
Dr
.
$
62,000.00
To vehicle
$
126,000.00
To deferred tax
liability
$
18,600.00

Running head: FINANCE
To business combination valuation reserve
$
169,400.00
(for depreciation charged and adjusted against
BCVR)
30th June
2020
Depreciation
Expense
Dr
.
$
15,625.00
To accumulated Depreciation
$
15,625.00
(for depreciation transferred to accumulated
depreciation)
30th June
2020 Land
Dr
.
$
149,800.00
To deferred tax liabilities
Dr
.
$
44,940.00
To BCVR
$
104,860.00
(For adjustments
made)
30th June
2020 Inventories A/c
Dr
.
$
74,900.00
To deferred tax liabilities
$
22,470.00
To BCVR
$
52,430.00
(For adjustments
made)
30th June
2020 Cost of sales
Dr
.
$
412,700.00
To income tax
expense
$
86,010.00
To BCVR
$
326,690.00
(for recording the expense)
30th June
2020 Profit and loss A/c
Dr
.
$
172,778.00
To depreciation on
plant
$
15,625.00
To non-controlling interest
$
85,743.00
To depreciation on fittings
$
4,000.00
to deferred tax $

Running head: FINANCE
liability 67,410.00
for recording the expenses in profit and loss
account
30th June
2020 Capital A/c
Dr
. 18000
To profit and loss
a/c 18000
for recording the net profit
Journal entry to recognize NCI
Entry of
NCI Retained earnings (1/7/19)
Dr
.
$
38,672.10
Share Capital
Dr
.
$
28,080.00
Asset Revaluation surplus
$
9,630.00
To shares in Davis Limited
$
76,382.10
for entry for non-controlling assets entry
passed
Consolidation worksheet entries
30th June
2020 Profit and loss A/c
D
r.
$
99,660.00
To depreciation on
plant
$
28,250.00
To depreciation on fittings
$
4,000.00
to deferred tax
liability
$
67,410.00
for recording the expenses in profit and
loss account
30th June
2020 Capital A/c
D
r. 18000
To profit and loss
a/c 18000
for recording the net profit

Running head: FINANCE
Difference from partial goodwill method to full goodwill method
The partial goodwill method and the full goodwill method are different from each other only in
case of the non-controlling interest aspect. Under the partial goodwill method the entry of the
non-controlling interest is recognized only in case of the parent company, whereas in case of the
full goodwill method the goodwill is allocated to both the parent and NCI. In the present case
scenario, the amount of NCI is $85743 and the same is reduced form the net identifiable value of
the assets after the acquisition. The balances are shown at 91% holding under the partial
goodwill method, whereas in case of the full goodwill method the balances are shown at 100%
method. The company will have to face a loss and the goodwill will be debited by $93557.14.
The shares in Davis limited will be shown at 100% and the share capital will be equal to
$342857. In the step 1 the amount of the goodwill change, in step 2 at the time of acquisition the
balance of the share capital and capital reserve will change. In step 3, the non-controlling interest
will be changed and step 4, the overall impact will be on profit (Xplain, 2017).

Running head: FINANCE
References
Xplain, (2017). Full Goodwill Method [Online] Available from https://xplaind.com/130366/full-
goodwill-method [Accessed on 16th September 2019]