ACCT20073 Company Accounting Report: Investment Analysis of Soletta

This company accounting project report analyzes Palvidia Ltd's potential investment in Soletta Ltd, covering consolidated financial statements, group company structures, and intra-group transaction adjustments. It includes an acquisition analysis with journal entries, goodwill calculation, and d...Read More

Running Head: Company Accounting
1
Project Report: Company Accounting
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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
salla.suchith kumar and12055680
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Company Accounting
Question 1:
Memorandum
To: Chief financial officer
Cc: Executive Committee
From: Accountant
Date:
Subject: Investment decisions in Soletta ltd.
The memorandum describes that whether the Palvidia Ltd should invest into the stock
of Soletta ltd and if the investment would be done than how it would affect the performance
of Palvidia ltd.
The main purpose of consolidated financial statements is to present the benefits of the
creditors and owner of the business about the operations and the performance of the business.
It is prepared by the parent company which owns more than one subsidiary in order to get the
entire result about the performance of the business.
A group company is a collection of parent and subsidiary companies which operates
as a single economic entity along with a common source of control. Group could be owned
by a holding company as well which actually does not have any operations. On the other
hand, a parent company is an organization which has a controlling interest in other company.
These types of companies conduct their own operations and have a substantial interest in the
subsidiaries companies (Netter, Stegemoller & Wintoki, 2011). Further, the subsidiary
companies are those companies which are controlled and owned by the other companies. The
operations are managed by the subsidy company at itself.
A group can hold as many parent companies as possible because of the fact that the
group companies are just in the position to maintain the parent and subsidiary companies.
They do not have their own operations and thus the number of parent companies could be
anything, the only condition is that the parent companies operate as a single economic entity
along with a common source of control.
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Company Accounting
The adjustment for intra group transaction is required in the business to prepare the
consolidated financial statement of the business. The transaction has not been done with the
external parties and thus the adjustment entries reduce the effect on the final financial
statement of the business (Marks & Mirvis, 2011). Realization occurs at the time of
involvement of any external entity such as when the inventory has been sold to other business
which is not the member of the group.
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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
1/07/201
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Sundry Assets $ 50,000
Business combination valuation reserve $ 30,000
Accumulated depreciation $
80,000
1/07/201
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Business combination valuation reserve $ 40,000
Accumulated depreciation $
40,000
1/07/201
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Deferred tax assets $ 3,000
Profit and loss a/c $
3,000
1/07/201
9 Goodwill on acqusiition $ 1,000,000
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Company Accounting
Accumulated impairment loss
$
150,000
Business combination valuation reserve
$
850,000
W.N.
Calculation of deferred tax assets
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
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Company Accounting
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
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
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Company Accounting
References:
Marks, M. L., & Mirvis, P. H. (2011). Merge ahead: A research agenda to increase merger
and acquisition success. Journal of business and psychology, 26(2), 161-168.
Netter, J., Stegemoller, M., & Wintoki, M. B. (2011). Implications of data screens on merger
and acquisition analysis: A large sample study of mergers and acquisitions from 1992
to 2009. The Review of Financial Studies, 24(7), 2316-2357.
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