University Finance: Management Accounting Assignment Solution

This management accounting assignment solution focuses on business combinations and consolidation. It begins with an acquisition analysis, detailing the valuation of assets and liabilities acquired by Ethan Ltd from Davis Ltd, including the calculation of goodwill. The solution then presents business combination valuation entries and pre-acquisition entries, followed by the journal entry to recognize Non-Controlling Interest (NCI). It provides consolidation worksheet entries, assuming a profit for the year, and explains the full goodwill method, highlighting its impact on goodwill valuation compared to the partial goodwill method. The assignment includes references to academic literature supporting the financial accounting concepts discussed, providing a comprehensive understanding of the topics covered.

Running head: INTRODUCTION TO MANAGEMENT ACCOUNTING
Introduction to Management Accounting
Name of the Student:
Name of the University:
Author Note

1INTRODUCTION TO MANAGEMENT ACCOUNTING
Table of Contents
1. Preparing the acquisition analysis at acquisition date:...........................................................2
2. Preparing the business combination valuation entries and pre-acquisition entry at
acquisition date:.........................................................................................................................2
3. Preparing the journal entry to recognise NCI at acquisition date:.........................................4
4. Preparing the consolidation worksheet entries at 30 June 2020, while assuming a profit for
the year of $81,000:....................................................................................................................4
5. Explaining the step by providing the full goodwill method:..................................................5
References and Bibliography:....................................................................................................6

2INTRODUCTION TO MANAGEMENT ACCOUNTING
1. Preparing the acquisition analysis at acquisition date:
Acquisition Analysis at July 2019
Particulars Value
Inventories 308,308
Land 617,253
Vehicle 719,810
Fittings 6,338
Liabilities (Contingent) 31,850
Share capital 1,285,830
General reserve 550,550
Asset revaluation surplus 440,440
Net fair value 3,960,379
Consideration transferred 4,036,000
Goodwill paid 75,621
The information in the above table provides highlight on the acquisition analysis at
July 2019, which is conducted for detecting the level of valuation that is associated with the
acquisition process of Davis Ltd. In addition, the calculations have indicated that the overall
net fair value of the assets that is acquired by Ethan Ltd of Davis Ltd is at the levels of
3,960,379. However, Ethan Ltd has provided a consideration amount of 4,036,000, which
makes the total goodwill paid by Ethan Ltd at 75,621 (Bisogno, Santis and Tommasetti
2015).
2. Preparing the business combination valuation entries and pre-acquisition entry at
acquisition date:
WORKSHOP ENTRIES AT 30 JUNE, 2020
Business combination value entries
Particulars Amount Amount
Goodwill…..................Dr 75,621
BCVR 75,621
Inventories……………Dr 440,440
Income tax expense 132,132
Transfer from BCVR 308,308

3INTRODUCTION TO MANAGEMENT ACCOUNTING
Land………………………Dr 881,790
Deferred tax liability 264,537
BCVR 617,253
Accumulated Depreciation (Vehicles)……….Dr 257,530
Vehicle…………………………….Dr 1,028,300
Deferred tax liability 385,749
BCVR 900,081
Accumulated Depreciation (Fittings)……….Dr 4,527.25
Vehicle…………………………….Dr 9,054.50
Deferred tax liability 4,075
BCVR 9,507
Depreciation expense (Vehicles)…………………Dr 146,263
Accumulated depreciation (Vehicles) 146,263
Depreciation expense (Fittings)…………………Dr 1,545
Accumulated depreciation (Fittings) 1,545
Deferred tax liability…………….Dr 43,879
Deferred tax liability…………….Dr 463
Income tax expense 44,342
BCVR 31,850
Deferred tax asset 13,650
Contingent liabilities 45,500
PRE ACQUISITION ENTRIES 2020
Particulars Amount Amount
Share capital…........Dr 1,285,830
General reserve…........Dr 550,550
Asset revaluation surplus…........Dr 440,440
Goodwill…..................Dr 75,621
BCVR…....................Dr 1,683,559
Shares in Davis Ltd 4,036,000
Transfer from BCVR……………Dr 308,308
BCVR 308,308
The information in the above table states about the Business combination valuation
reserve and pre-acquisition entries for Ethan Ltd. This would mainly help in determining the

4INTRODUCTION TO MANAGEMENT ACCOUNTING
level of valuation for the assets, liabilities, share capital, general reserves, and asset
revaluation surplus. This method would mainly help in determining the accurate level of
valuation for Ethan Ltd, which could be made in consolidated worksheet (Hoyle, Schaefer
and Doupnik 2015).
3. Preparing the journal entry to recognise NCI at acquisition date:
NCI ENTRIES at ACQUISITION 2020
Particulars Amount Amount
Share capital…........Dr 127,170
General reserve…........Dr 54,450
Asset revaluation surplus…........Dr 43,560
Goodwill…..................Dr 7,479
BCVR…....................Dr 166,506
NCI 399,165
The above journal entry is based on the non-controlling interest of Davis Ltd, which is
at the level of 9%. The journal entries mainly help in detecting the level of valuation for the
non-controlling interest that is maintained by Davis Ltd.
4. Preparing the consolidation worksheet entries at 30 June 2020, while assuming a
profit for the year of $81,000:
WORKSHOP ENTRIES AT 30 JUNE, 2020
Particulars
Ethan
Ltd Davis Ltd Debit Credit Total
Land 1,211,000 1,211,000
Vehicle 1,413,000 1,413,000
Fittings 59,950 59,950
Goodwill 83,100 83,100
2,767,050
Share capital 1,285,830 127,170 1,413,000
General reserve 550,550 54,450 605,000

5INTRODUCTION TO MANAGEMENT ACCOUNTING
Asset revaluation surplus 440,440 43,560 484,000
Profit 81,000 81,000
BCVR
184,05
0
184,050
2,767,050
The calculations in the above table states about the workshop entries that could be
used for detecting the consolidated calculations for both Ethan Ltd and Davis Ltd. The
consolidation entries mainly help in determining the appropriate level of financial statement,
which could be generated from the operations. This kind of information is essential for
companies that have shares in different companies and is used for preparing the consolidated
income and balance sheet for the use of the investors.
5. Explaining the step by providing the full goodwill method:
The calculations for partial goodwill and full goodwill method is relevantly different,
which make certain alterations to the calculations. The alternations associated with the
calculations is relevant to net identifiable assets, while the NCI is not included in the
calculations under the partial goodwill method. Hence, if the overall calculations conducted
in the above tables use full goodwill method then the valuation of the goodwill might alter
and provide different results for both the worksheet, journal entries and business combination
valuation reserve (Robinson 2020). Therefore, the patrial goodwill method is only used when
the noncontrolling interest is present within the organisation, as it provides the organisation to
estimate the actual valuation of the goodwill that the present within the consideration amount.
Therefore, under the full goodwill method the overall calculations would include the
goodwill in for NCI in subsidiary as well as the controlling interest. Therefore, the goodwill
is acquired under interest only when the overall partial method is used by companies for

6INTRODUCTION TO MANAGEMENT ACCOUNTING
determining the appropriate value. Thus, the valuation for goodwill of Ethan ltd would
change under full method, as compared to the partial method (Grossi and Steccolini 2015).

7INTRODUCTION TO MANAGEMENT ACCOUNTING
References and Bibliography:
Bergmann, A., Grossi, G., Rauskala, I. and Fuchs, S., 2016. Consolidation in the public
sector: methods and approaches in Organisation for Economic Co-operation and
Development countries. International Review of Administrative Sciences, 82(4), pp.763-783.
Bisogno, M., Santis, S. and Tommasetti, A., 2015. Public-Sector consolidated financial
statements: An analysis of the comment letters on IPSASB’s exposure draft no.
49. International Journal of Public Administration, 38(4), pp.311-324.
Grossi, G. and Steccolini, I., 2015. Pursuing private or public accountability in the public
sector? Applying IPSASs to define the reporting entity in municipal
consolidation. International Journal of Public Administration, 38(4), pp.325-334.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Advancing the integration of corporate
sustainability measurement, management and reporting. Journal of cleaner production, 133,
pp.859-862.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability
assessment, management accounting, control, and reporting. Journal of Cleaner
Production, 136, pp.237-248.
Robinson, T.R., 2020. International financial statement analysis. John Wiley & Sons.
Schaltegger, S., Etxeberria, I.Á. and Ortas, E., 2017. Innovating corporate accounting and
reporting for sustainability–attributes and challenges. Sustainable Development, 25(2),
pp.113-122.