Financial Accounting Consolidation Worksheet Analysis - ACC567

This document presents a comprehensive solution to a financial accounting assignment, focusing on the preparation of consolidation worksheets. The solution is divided into two parts, each addressing a different scenario. Part 1 demonstrates the computation of acquisition analysis, calculating goodwill and net fair value of assets acquired. Part 2 provides consolidation worksheet entries for Positive Ltd.’s group, including adjustments for fair valuation, depreciation, impairment of goodwill, and settlement of contingent liabilities. Part 3 presents the consolidated financial statements, including the income statement and balance sheet, with detailed adjustment entries. The solution also covers inter-company transactions, such as management fees, sales of inventory, and dividends. The second part of the document presents a similar consolidation worksheet for Ping Pong Ltd’s group. This solution addresses the elimination of intercompany transactions and the recording of goodwill impairment. The document provides a thorough analysis of consolidation accounting principles and their application in various scenarios.

Solution-1
Part-1
Computation of acquisition analysis as on 1 July, 2017
Share Capital $65,000
General reserve $25,000
Retained Earnings $20,250
Add: Fair valuation - Plant $3,500
Add: Fair valuation - Land $7,000
Add: Fair valuation - Inventories $2,800
Add: Fair valuation - Brand value $4,200
Less: Fair valuation - Contingent liability -$5,250
Less: Recorded Goodwill -$2,500 $9,750
Net fair value of assets acquired $120,000
Consideration transferred to acquire Smart Ltd. $123,000
Goodwill $3,000
Less: Goodwill already recorded -$2,500
Unrecorded goodwill $500

Part-2
Consolidation worksheet entries for Positive Ltd’s group at 30 June 2019
Particulars Dr. Cr.
Share Capital $65,000
General reserve $17,500
Retained Earnings (1/7/18) (20,250+7,000+2,800+7,500) $37,550
Business combination valuation reserve $2,950
Shares in Smart Ltd. $123,000
(Pre-acquisition entry recorded)
Brands $6,000
Business combination valuation reserve $4,200
Deferred tax liabilities $1,800
(Fair valuation of brands recorded)
Transfer from business combination valuation reserve $5,250
Income tax expense $2,250
Damages expenses $7,500
(Settlement of liability recorded)
Retained Earnings (1/7/18) $700
Depreciation expense $500
Gains (losses) on sale of non-current assets $3,500
Income tax expense $1,200
Transfer from business combination valuation reserve $3,500
(Sale of plant recorded)
Accumulated impairment loss $6,500
Goodwill $6,000
Business combination valuation reserve $500
(Impairment of goodwill recorded)
Transfer from business combination valuation reserve $3,500
Business combination valuation reserve $3,500
(Amount transferred for sale of plant)
Business combination valuation reserve $5,250
Transfer from business combination valuation reserve $5,250
(Amount transferred for settlement of contingent liability)
Transfer from General reserve $7,500

General reserve $7,500
(Amount transferred from general reserve)

Part-3
Consolidation worksheet for Positive Ltd’s group at 30 June 2019
Income Statement / Balance
Sheet
Positive
Ltd
Smart
Ltd Total Adjustment entries Group
Dr. Cr.
Revenue $45,000 $32,000 $77,000 $77,000
Expenses $17,000 $21,000 $38,000 $500 $7,500 $31,000
Trading profit $28,000 $11,000 $39,000 $46,000
Gains (losses) on sale of non-
current assets $4,000 $4,000 $8,000 $3,500 $4,500
Profit before tax $32,000 $15,000 $47,000 $50,500
Income tax expense $6,000 $2,500 $8,500 $2,250 $1,200 $9,550
Profit for the period $26,000 $12,500 $38,500 $40,950
Retained earnings 1 July 2018 $51,500 $27,500 $79,000 $38,250 $40,750
Transfer from BCVR $0 $8,750 $8,750 $0
Transfer from general reserve $15,000 $7,500 $22,500 $7,500 $15,000
$92,500 $47,500 $140,000 $96,700
Dividend paid $10,000 $0 $10,000 $10,000
Retained earnings 30 June 2019 $82,500 $47,500 $130,000 $86,700
Share capital $75,000 $65,000 $140,000 $65,000 $75,000
General reserve $5,000 $10,000 $15,000 $17,500 $7,500 $5,000
Business combination valuation
reserve $0 $8,200 $8,200 $0
Other components of equity
(30/6/19) $12,500 $9,000 $21,500 $21,500
Total equity $175,000 $131,500 $306,500 $188,200
Accounts payable $20,000 $5,000 $25,000 $25,000
Deferred tax liability $9,000 $5,000 $14,000 $1,800 $15,800
Other non-current liabilities $125,000 $115,000 $240,000 $240,000
Total liabilities $154,000 $125,000 $279,000 $280,800
Total equity and liabilities $329,000 $256,500 $585,500 $469,000
Plant $157,000 $233,000 $390,000 $390,000
Accumulated depreciation - plant -$91,000 -$110,000
-
$201,000
-
$201,000
Land $10,000 $10,000 $20,000 $20,000
Brands $40,000 $0 $40,000 $6,000 $46,000
Shares in Smart Ltd $123,000 $0 $123,000 $123,000 $0
Financial assets $55,000 $103,500 $158,500 $158,500
Cash $5,000 $2,500 $7,500 $7,500

Inventories $20,000 $15,000 $35,000 $35,000
Goodwill $10,000 $9,000 $19,000 $6,000 $13,000
Accumulated impairment losses $0 -$6,500 -$6,500 $6,500 $0
Total assets $329,000 $256,500 $585,500 $469,000

Solution-2
Part-1
Computation of acquisition analysis
Share Capital $150,000
General reserve $20,000
Retained Earnings $10,000
Net fair value of assets acquired $180,000
Consideration transferred to acquire Sing Song Ltd. $200,000
Goodwill $20,000

Part-2
Consolidation worksheet entries for Ping Pong Ltd’s group at 30 June 2019
Particulars Dr. Cr.
Share Capital $150,000
General reserve $20,000
Retained Earnings (1/7/18) $10,000
Goodwill $20,000
Shares in Sing Song Ltd. $200,000
(Pre-acquisition entry recorded)
Accumulated impairment loss $20,000
Goodwill $20,000
(Impairment of goodwill recorded)
Management fee revenue $7,000
Management fee expense $7,000
(Inter-company transaction of management fee eliminated)
Accounts payable $10,000
Accounts receivable $10,000
(Inter-company transaction of sale of inventory eliminated)
12% unsecured notes $25,000
Interest revenue $3,000
Unsecured notes $25,000
Interest expense $3,000
(Inter-company transaction of notes eliminated)
Dividend revenue $5,000
Dividend payable $3,000
Interim dividend paid $2,000
Dividend receivable $3,000
Final dividend proposed $3,000
(Inter-company transaction of dividend paid eliminated)