University Company Accounting: Consolidation and Financial Statements

This assignment provides a detailed solution to a Company Accounting case study focusing on the consolidation of financial statements. It includes a practical application of accounting principles, specifically addressing the preparation of consolidated financial statements, acquisition analysis, and consolidation journal entries. The solution demonstrates the creation of a consolidation worksheet, incorporating adjustments for fair value differences, goodwill calculation, and the elimination of intercompany transactions. Furthermore, the assignment covers the treatment of deferred tax liabilities, business combination valuation reserves, and the impact of dividends on the consolidated financial position. The document also features a discussion section explaining the rationale behind the accounting entries and adjustments made in the consolidation process, providing a comprehensive understanding of the topic.

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student
Name of the University
Author Note

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Table of Contents
Part A...........................................................................................................................................2
Problem Solving Practical............................................................................................................2
Problem Solving Discussion........................................................................................................6
References....................................................................................................................................8

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Part A
Problem Solving Practical
Particulars Amount Amount Amount
Liabilities(A)
Share Capital 259200
Retained Earnings 172800
General Reserve 86400
Total 518400
Difference of Carrying amount & Fair value of the
assets (B)
Fair
Value
Carrying
Amount
Inventories 76800 67200 9600
Plant 451200 444000 7200
Total 16800
Net Fair Value of Assets and Liabilities 501600
Consideration Transferred 578160
Less: Dividends Receivable 24000
Net Consideration paid 554160
Goodwill arising on acquisition 52560
Ii Consolidation Worksheet Entries
Date Details Debit
($)
Credit
($)

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1.7.201
9
Accumulated Depreciation- Plant 36000
Plant 28800
Deferred Tax Liability 2160
Business Combination Reserve 5040
Goodwill 52560
Business Combination Valuation Reserve 52560
(Goodwill transferred to Business Combination Reserve)
Retained Earnings 17280
0
Share Capital 25920
0
General Reserve 86400
Business Combination Valuation Reserve 35760
Shares in Heights Ltd. 554160
Seacome
Ltd.
Heights
Ltd.
Adjustments Group ($)
Dr ($) Cr ($)
Revenue 1200000 266400 1466400
Cost of Sales -432000 -110400 -542400

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Depreciation - Plant 96000 -96000
Other Expenses -192000 -96000 -288000
Profit Before Tax 576000 60000 540000
Income Tax Expense -268800 -20160 162000
Profit 307200 39840 378000
Retained Earnings (1/7/19) 384000 172800 556800
Transfer from BCVR - - -
Transfer from GR 0 -14400 -14400
Retained Earnings (30/6/20) 691200 198240 14400 875040
Share Capital 1816800 259200
BCVR - - 35760 35760
General Reserve 48000 100800 14400 163200
Total Equity 2556000 558240 3236400
Deferred Tax Liability 9600 9600 0
Other Liabilities 204000 28800 232800
Total Liabilities 204000 38400 232800
Total Equity and Liabilities 2760000 596640 3469200
Cash 90720 18000 108720
Inventories 147120 47760 47760 147120
Land 768000 86400 1058160
Plant 1728000 602880 2330880

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Acc'd depreciation -528000 -158400 -96000 -782400
Goodwill 52560 52560
Shares in Heights Ltd. 554160 - 554160
Total Assets 2760000 569640 3469200
Statement of Changes in Equity
Particulars Amoun
t
Amount
Beginning Balance 3114240
Retained Earnings 556800
Transfer of retained earnings -14400
Profits during the year 378000
Payment of Dividends -798240
Closing Balance 3236400
Statement of Financial Position as on
30.6.2020
Amoun
t
Amount
Share Capital 3236400
Total Equity 3236400
Other Liabilities 232800

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Total Liabilities 232800
Total Equity and Liabilities 3469200
Assets
Cash 108720
Inventories 147120
Land 1058160
Plant 2330880
Acc'd depreciation -782400
Goodwill 52560
Shares in Heights Ltd. 554160
Total Assets 3469200
Problem Solving Discussion
i. In case of Seacome Group Ltd., the adjustment entries which will be made for the
year ended 30 June 2020 include the payment of dividends by Heights Ltd. to
Seacome Ltd. This would result in a decrease in the dividends payable and dividends
receivable aspects of the balance sheet. Hence, the assets and liabilities side of the
balance sheet would remain the same as they decrease by a common amount. Other
adjustment entries which would be made include the elimination of the equities,
reserves and balances of the subsidiary in the consolidated books of accounts of the
entity. Another adjusting entry will be related to the depreciation of the plant which
will be deducted from the balance of the assets and added to the accumulated
depreciation of the entity. This will reduce the balance of the assets within the entity.

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Other changes that will be the elimination of any intra-company sales and profits
arising from them within the business. The deferred tax will also be adjusted against
the income taxes of the current year. This would lead to a reduction in the liabilities
of the entity. The inventories sold during the year will be deducted from the total
liabilities balance of the entity.
ii. The accumulated depreciation on the plant is transferred to the business valuation
combination reserve. The goodwill arising from the acquisition is also transferred to
the business combination reserve. The assets and liabilities added to these reserves
are adjusted against the shares purchased in Heights Ltd. They will be a part of the
current liabilities of the entity and will be used in increasing the liabilities side of the
balance sheet.

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Bibliography
Hoyle, J. B., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill.
Narayanaswamy, R. (2017). Financial accounting: a managerial perspective. PHI Learning Pvt.
Ltd..