University Financial Accounting: Consolidated Balance Sheet Analysis

This assignment provides a comprehensive solution to advanced financial accounting problems, specifically focusing on the preparation of consolidated financial statements. The solution addresses three key questions: The first question involves preparing a consolidated statement of financial position using both the identifiable net assets method and the fair value entity method, demonstrating the calculation of goodwill and non-controlling interest. The second question requires the preparation of a consolidated balance sheet, incorporating fair value adjustments for various assets and liabilities, and calculating goodwill. The third question analyzes an acquisition scenario, including the calculation of equity attributable to the acquiring company, amortization schedules, and impairment of goodwill. The assignment covers key concepts such as consolidation methods, fair value adjustments, goodwill calculations, non-controlling interest, and balance sheet preparation.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Answer to question 1:......................................................................................................................2
Answer to question 2:......................................................................................................................4
Answer to question 3:......................................................................................................................5
Bibliography:...................................................................................................................................7

2ADVANCED FINANCIAL ACCOUNTING
Answer to question 1:
Identifiable net assets method:
Workings:
Ordinary shares $ 4,500.00
Retained earnings $ 5,950.00
Fair value adjustments:
Plant and equipment (Net) (7000-8300) $ (1,300.00)
Inventory (5500-5300) $ 200.00
Value of Identifiable Net Assets $ 9,350.00
Net assets attributable to the P Company (9350*90%) $ 8,415.00
Less: Purchase consideration transferred $ 8,887.50
Value of goodwill $ 472.50
NCI Share in equity (9350*10%) $ 935.00
Consolidated statement of financial position
Plant and equipment $ 16,600.00
Goodwill $ 472.50
Total non-current assets $ 17,072.50
Cash $ 7,050.00
Accounts receivables $ 9,450.00
Inventory $ 12,160.00
Total current assets $ 28,660.00
Total assets $ 45,732.50
Accounts payable $ 3,600.00
Other current liabilities $ 5,787.50
Total current liabilities $ 9,387.50
Long term liabilities $ 8,000.00
Total noncurrent liabilities $ 8,000.00
Total liabilities $ 17,387.50
Net Assets $ 28,345.00
Ordinary shares $ 12,000.00
Retained earnings $ 15,410.00
Non-Controlling Interest $ 935.00
Total Equity $ 28,345.00

3ADVANCED FINANCIAL ACCOUNTING
Fair value entity method:
Workings:
Plant and equipment (Net) $ 7,000.00
Inventory $ 5,500.00
Accounts receivables $ 3,300.00
Cash $ 2,550.00
Total Fair value of assets $ 18,350.00
Long term liabilities $ 3,500.00
Other current liabilities $ 3,300.00
Accounts Payable $ 2,200.00
Total fair value of liabilities $ 9,000.00
Value of business $ 9,350.00
Purchase consideration transferred for 90% of shares $ 8,887.50
Fair value of non-controlling interest
(8887.50*10/90) $ 987.50
Total fair value of business $ 9,875.00
Goodwill $ 525.00
Consolidated statement of financial position
Plant and equipment $ 16,600.00
Goodwill $ 525.00
Total non-current assets $ 17,125.00
Cash $ 7,050.00
Accounts receivables $ 9,450.00
Inventory $ 12,160.00
Total current assets $ 28,660.00
Total assets $ 45,785.00
Accounts payable $ 3,600.00
Other current liabilities $ 5,787.50
Total current liabilities $ 9,387.50
Long term liabilities $ 8,000.00
Total noncurrent liabilities $ 8,000.00
Total liabilities $ 17,387.50

4ADVANCED FINANCIAL ACCOUNTING
Net Assets $ 28,397.50
Ordinary shares $ 12,000.00
Retained earnings $ 15,410.00
Non-Controlling Interest $ 987.50
Total Equity $ 28,397.50
Answer to question 2:
Workings:
Common shares $ 60,000
Retained earnings $ 56,000
Fair value adjustment:
Inventory (52000-42000) $ 10,000
Plant (120000-102000) $ 18,000
Trademarks (28000-14000) $ 14,000
Taxi license $ 45,000
Long term liabilities (40000-38000) $ 2,000
Fair value identifiable net assets $ 205,000
Purchase consideration transferred $ 200,000
Fair value of non-controlling interest $ 44,000
Total fair value of the business $ 244,000
Value of goodwill $ 39,000
Value of goodwill attributable to the Non-controlling interest
(39000*20%) $ 7,800
Consolidated balance sheet
Cash $ 4,000
Accounts receivables $ 64,000
Inventory $ 112,000
Total current assets $ 180,000
Plant $ 595,000
Accumulated depreciation $ (125,000)
Goodwill $ 31,200
Trademarks $ 28,000
Taxi license $ 45,000
Total non-current assets $ 574,200

5ADVANCED FINANCIAL ACCOUNTING
Total Assets $ 754,200
Current liabilities $ 120,000
Total current liabilities $ 120,000
Long term debt $ 198,000
Total noncurrent liabilities $ 198,000
Total liabilities $ 318,000
Net assets $ 436,200
Common shares $ 220,000
Retained earnings $ 180,000
Non-controlling interest $ 36,200
Total Equity $ 436,200
Answer to question 3:
Acquisition analysis:
Total outstanding shares $ 500,000
Number of shares acquired $ 400,000
Percentage of holding $ 1
Percentage of non-controlling interest $ 0
Common shares $ 3,000,000
Retained earnings $ 2,050,000
Fair value adjustment:
Inventories (1750000-1500000) $ 250,000
Machinery (5500000-5000000) $ 500,000
Customer lists $ 520,000
Long term debt (1300000-1600000) $ (300,000)
Fair value of Identifiable net assets $ 6,020,000
Less: Fair value of non-controlling interest (5200000*20/80) $ 1,300,000
Equity attributable to the acquiring company $ 4,720,000
Shares issued (510000*10) $ 5,100,000
Cash paid $ 100,000
Total purchase consideration transferred $ 5,200,000
Value of goodwill (5200000-4816000) $ 480,000

6ADVANCED FINANCIAL ACCOUNTING
Amortization and Impairment schedule:
1-Jul-14
Depreciation on machinery (5500000/5) $ 1,100,000
Amortization of Customer lists (520000/10) $ 52,000
Total amortization and impairment $ 1,152,000
1-Jul-15
Depreciation on machinery (5500000/5) $ 1,100,000
Amortization of Customer lists (520000/10) $ 52,000
Impairment of goodwill $ 120,000
Total amortization and impairment $ 1,272,000
1-Jul-16
Depreciation on machinery (5500000/5) $ 1,100,000
Amortization of Customer lists (520000/10) $ 52,000
Impairment of goodwill $ 140,000
Total amortization and impairment $ 1,292,000

7ADVANCED FINANCIAL ACCOUNTING
Bibliography:
Hadi, K.T., 2015. Consolidated financial statements.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning Pvt.
Ltd..
Sedki, S.S., Smith, A. and Strickland, A., 2014. Differences and similarities between IFRS and
GAAP on inventory, revenue recognition and consolidated financial statements. Journal of
Accounting and Finance, 14(2), p.120.