Company Accounting Project Report: Financial Statement Analysis

This company accounting project report analyzes investment decisions, the purpose of consolidated financial statements, and the roles of group, parent, and subsidiary companies. It includes an acquisition analysis of Paldivia Ltd, detailing goodwill calculation and journal entries. Furthermore, it covers various financial statement adjustments related to retained earnings, income tax, cost of sales, unearned service revenue, loan transactions, and dividend declarations. The report also addresses intra-group transactions and their impact on consolidated financial statements, emphasizing the importance of external transactions for revenue realization. Desklib provides this assignment solution and many more to aid students in their studies.

Running Head: Company Accounting 1
Project Report: Company Accounting
Student name and college id 1

Company Accounting
Marking criteria sheet
Student name Student ID
Part B Marking Criteria Sheet Marks
Available
Marks
awarded
20 marks
Question 1 10
Question 2 20
Question 3 50
Less: Not complying with formatting, word count
and marking criteria sheet
Part B Assignment Total 80 marks
Part B Assignment: 20% weighting 20 marks
Less: Late penalty (5% per day)
Part B Assignment: Final mark 20 marks
Additional comments from marker
Student name and college id 2

Company Accounting
Question 1:
Memorandum
To: Chief financial officer (CFO)
Cc: Other team members
From: Accountant name
Date: 6 Sept 2018
Subject: Investment decisions in Soletta ltd.
This memorandum has been prepared to analyze that why an organization should
acquire other company and how the financial records are prepared in the company. In the
memorandum, purpose of consolidated financial statement, meaning of group, subsidiary and
parent company, intra transaction adjustment etc has been studied.
consolidated financial statements are the statement which collectively describe about
the financial performance of an organization. The main purpose behind the preparation of
consolidated financial statement is describe the overall performance to the stakeholders of the
parent company. A parent company prepares the consolidated financial statement which
includes the statement of subsidiary companies as well.
Group, parent and subsidiary companies are inter linked to each other. A group
company owns the parent company and subsidiary companies. It is not important for a group
company to have the operations in the industry. Further, a parent company is could be a part
of Group Company which holds the control of interest in various subsidiary companies. The
substantial interest in the subsidiary companies improves the profitability level of the
business (Higgins, 2012). Lastly, those companies who are controlled and owned by the other
companies are the subsidiary companies.
A group is eligible to hold various parent companies at the same time. The only
condition with the group company is that the parent companies must operate as a single
economic entity and it must also have common source of control over the interest and the
profits.
Student name and college id 3

Company Accounting
Intra group transactions are recorded by the parent companies in their consolidated
financial statement to reduce the impact of inter transaction among the companies. It contains
only those transactions which have taken place in the business only (Haney, 2009).
Operations and transaction with external parties are not collected.
Realization of inventory in the business occurs at the time when external entities are
involved in the transaction, such as, at the time, when the inventory is sold to clients which
are not the part of company.
Student name and college id 4

Company Accounting
Question 2:
Acquisition Analysis
On the date of 1st July 2019
Share capital $ 650,000
Ass: General Reserve $ 20,000
Add: Retained earnings $ 250,000
Add: Changes into equipment prices $ 50,000
Less: Accumulated depreciation -$ 80,000
Less: Liability -$ 40,000
Total value $ 850,000
Less: Purchase consideration $ 1,000,000
Goodwill on acquisition $ 150,000
General Journal Entries of Paldivia Ltd
On the date of 1st July 2019
Date Particulars Debit Credit
1/07/2019 Sundry Assets $ 50,000
Business combination valuation reserve $ 30,000
Accumulated depreciation $ 80,000
1/07/2019 Business combination valuation reserve $ 40,000
Accumulated depreciation $ 40,000
1/07/2019 Deferred tax assets $ 3,000
Profit and loss a/c $ 3,000
1/07/2019 Goodwill on acqusiition $ 1,000,000
Accumulated impairment loss $ 150,000
Business combination valuation reserve $ 850,000
W.N.
Calculation of deferred tax assets
Student name and college id 5

Company Accounting
Total increment in the Assets $ 50,000
Less: Increment in the liabilities -$ 40,000
Net Assets $ 10,000
DTA (Tax rate @ 30%) $ 3,000
Question 3:
a) Retained Earnings $ 163
Income tax expenses $ 70
Cost of sales (6000*1/3)*20/120*70% $ 233
b) Retained Earnings (1/1/14) $ 2,800
Deferred tax assets (Difference *30% $ 1,200
Tractors (Differences) $ 4,000
Accumulated depreciation $ 1,000
Depreciation expenses $ 400
Retained earnings $ 600
(10% *4000 p.a. for 2.5 years)
Income tax expenses (Depreciation expenses
*30%)
$ 120
Retained earnings (Retained earnings *30%) $ 180
Deferred tax assets $ 300
c) Retained Earnings (1/5/19) $ 140
Income tax expenses $ 60
Cost of sales $ 200
d) Unearned Service revenue $ 3,000
Accrued Service expenses $ 3,000
e) Loan payable a/c $ 50,000
Loan receivable a/c $ 50,000
Interest revenue a/c $ 4,500
Interest expenses a/c $ 4,500
(50000*6%*1.5)
Arrears in interest revenue $ 1,500
Arrears in interest expenses $ 1,500
Student name and college id 6

Company Accounting
f) Dividend revenue a/c $ 1,500
Interim dividend a/c $ 1,500
g) Dividend payable $ 3,000
Final dividend declared $ 3,000
Dividend revenue a/c $ 3,000
Dividend receivable $ 3,000
Student name and college id 7

Company Accounting
References:
Haney, L. H. (2009). Business Organization and Combination. BiblioBazaar, LLC.
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Student name and college id 8