Lead beaters Ltd & Possum Ltd: Analysis and Consolidated Statements

This report provides a comprehensive analysis of the consolidation of Lead beaters Ltd and Possum Ltd, focusing on the acquisition analysis, journal entries for consolidation and worksheet adjustments, and the preparation of consolidated financial statements. It delves into the rationale behind intra-group transactions, including the impact on inventory, deferred tax assets, and retained earnings. The analysis considers the elimination of intercompany profits and adjustments required to accurately reflect the financial position of the consolidated entity, ensuring that only transactions with external parties are recognized in the final statements. This document illustrates the complexities of corporate accounting in the context of business combinations.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1CORPORATE ACCOUNTING
Table of Contents
Acquisition analysis of Possum Ltd:...............................................................................................2
Journal entries for the Consolidation of Lead beaters Ltd and Possum Ltd:...................................3
Journal entries for the worksheet of Lead beaters Ltd and Possum Ltd:.........................................3
Consolidated financial statements of Lead beaters Ltd and Possum Ltd:.......................................4
Providing the rationale of the intra-group transactions:..................................................................4
References:......................................................................................................................................7

2CORPORATE ACCOUNTING
Acquisition analysis of Possum Ltd:

3CORPORATE ACCOUNTING
Journal entries for the Consolidation of Lead beaters Ltd and Possum Ltd:
Journal entries for the worksheet of Lead beaters Ltd and Possum Ltd:

4CORPORATE ACCOUNTING
Consolidated financial statements of Lead beaters Ltd and Possum Ltd:
Providing the rationale of the intra-group transactions:
Adequate consolidation has been conducted for the inter group transactions, where
certain rationale has been used for preparing the final accounts. The transactions conducted are
related to internal entries, which is not linked with external sources (Nobes 2014). Moreover,
retained earnings before tax and inventory organization is evaluated under the intra group
transactions for detecting the accurate value of the consolidated statements. Analysis of the intra
group transactions are depicted as follows.

5CORPORATE ACCOUNTING
Understanding the inventory position of the organisation:
The evaluation of the inventory position is relatively considered at cost, where the
unrecognized process in added to the inventory value. This has helped in detecting the group
inventory values, which is used in the consolidation process. Unearned revenues are directly
reduced from the actual inventory that is held by the company for detecting inventory value at
the end of the financial year. The intra group inventory value have highlighted the accurate level
of inventory that is maintained by Lead beaters Ltd after the acquisition (Hoyle, Schaefer and
Doupnik 2015).
Understanding the deferred tax assets of the organisation:
The valuation of the inventory has affected the actual deferred tax of the organization, as
we carrying amount of inventory has changed in the consolidated statement. The unearned
revenues of the organization have also been omitted in the group transaction, which directly
increases the deferred tax Assets of the company. Furthermore, the change in the values of
inventory will also alter the values of the deferred tax assets. Hence, the acquisition will nullify
the tax on sales of the inventory that was conducted within the group. Thus, this has increased
the accurate deferred tax of Lead beaters Ltd after the acquisition process (Gray 2014).
Understanding the retained earnings of the organisation:
Furthermore, the analysis conducted on the retained earnings of the company involves all
the inventory sales that have been conducted within the group. This valuation process has
relatively helped in eliminating the process that has generated from the sale, which incurred
within the group. Consolidation statement does not incorporate the sale of inventory between the
groups and only considers the inventory profits when the actual sale is been conducted outside

6CORPORATE ACCOUNTING
the entity. Hence, the entry that is conducted within the group is adjusted with the consolidated
statements to detect the accurate level of income from operations. In addition, the retained
earning values of Lead beaters Ltd has alerted in the consolidated entries after the acquisition, as
sales conducted with Possum Ltd is not considered as actual sales (Gillis, Petty and Suddaby
2014). After the acquisition, the sales that were conducted by both the companies are converting
into intra group transactions, where the goods are valued as inventory. Hence, sales value is
transferred back to the inventory value of Lead beaters Ltd after the acquisition.

7CORPORATE ACCOUNTING
References:
Gillis, P., Petty, R. and Suddaby, R., 2014. The transnational regulation of accounting: insights,
gaps and an agenda for future research. Accounting, Auditing & Accountability Journal, 27(6),
pp.894-902.
Gray, S.J. ed., 2014. International accounting and transnational decisions. Butterworth-
Heinemann.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Nobes, C., 2014. The development of national and transnational regulation on the scope of
consolidation. Accounting, auditing & accountability journal, 27(6), pp.995-1025.