Tuna Ltd. Acquisition Analysis, Consolidation, and Worksheet

This assignment presents a comprehensive financial analysis of Tuna Ltd.'s acquisition. It begins with the calculation of the fair value of net assets acquired as of July 1, 2015, including the valuation of share capital, retained earnings, plant, patent, and inventory, leading to the determination of goodwill. The solution then provides detailed consolidation journal entries for Tuna Ltd. as of June 30, 2017, covering pre-acquisition entries, business combination valuation adjustments, depreciation, and other consolidation entries related to sales revenue, cost of sales, inventory, and plant sales. Finally, the assignment includes a worksheet that consolidates the financial data of Tuna Ltd. and Brim Ltd., detailing adjustments and presenting a consolidated profit and loss statement and balance sheet. This analysis covers key accounting principles and practices related to business combinations and financial statement consolidation.

Solution-1
Acquisition analysis for Tuna Ltd. as on 1 July, 2015
Calculation of Fair Value of net assets acquired as on 1 July, 2015
Particulars Amount ($)
Share Capital 66,000
Retained Earnings 6,000
Fair value:
- Plant ((123000-120000)*(1-30%)) 2,100
- Patent ((105000-90000)*(1-30%)) 10,500
- Inventory ((22500-18000)*(1-30%)) 3,150
Net fair value of assets acquired 87,750
Consideration paid
- In cash 30,000
- In shares 60,000 90,000
Goodwill 2,250

Solution-2
Consolidation Journal Entries for Tuna Ltd. as on 30 June, 2017
Pre-Acquisition entry as on 1/7/15
Share Capital $ 66,000
Retained Earnings $ 6,000
Goodwill $ 2,250
Business Combination Valuation Reserve $ 15,750
To Shares in Brim Ltd. $ 90,000
Pre-Acquisition entry as on 30/6/17
The pre-acquisition entry as on 30/6/17 is affected due to sale of patent and inventory
1 Share Capital $ 66,000
Retained Earnings $ 19,650
Goodwill $ 2,250
Business Combination Valuation Reserve $ 2,100
To Shares in Brim Ltd. $ 90,000
Business Combination Valuation Entries
2 Accumulated Depreciation $ 30,000
To Plant $ 27,000
To Deferred tax liability $ 900
To Business Combination Valuation Reserve $ 2,100
3 Depreciation (3000/5) $ 600

Retained earnings (1/7/16) $ 600
To Accumulated Depreciation $ 1,200
Deferred tax liability $ 360
To Income tax expense $ 180
To Retained earnings (1/7/16) $ 180
Other consolidation entries
4(a) Sales revenue $ 21,000
To Cost of sales $ 21,000
Retained earnings (1/7/16) $ 420
Income tax expense $ 180
To Cost of sales $ 600
4(b) Sales revenue $ 4,500
To Cost of sales $ 4,200
To Inventory $ 300
Deferred tax asset $ 90
To Income tax expense $ 90
4(c) Proceeds on sale of Plant $ 15,000
To Carrying amount of plant sold $ 14,000

To Plant $ 1,000
Deferred tax asset $ 300
To Income tax expense $ 300
Accumulated Depreciation (1000*10%) $ 100
To Depreciation $ 100
Income tax expense $ 30
To Deferred tax asset $ 30
4(d) Retained earnings (1/7/16) $ 1,400
Deferred tax asset $ 600
To Plant (18000-16000) $ 2,000
Accumulated depreciation $ 1,000
To Depreciation expense (2000*20%) $ 400
To Retained earnings (1/7/16) (2000*20%*1.5) $ 600
Income tax expense $ 120
Retained earnings (1/7/16) $ 180
To Deferred tax asset $ 300
4(e) Proceeds on sale of Plant $ 9,000
To Carrying amount of plant sold $ 7,500
To Cost of sales $ 1,500

Solution-3
Worksheet
Tuna Brim Journal
number Adjustments Journal
number Group
Ltd Ltd Dr Cr
Sales revenue 64,500 78,000 4(a),4(b
) 25,500 117,000
Cost of sales 30,900 46,350 27,300 4(a),4(b)
,4(e) 49,950
Gross profit 33,600 31,650 67,050
Trading expenses 4,800 9,000 13,800
Office expenses 7,950 4,050 12,000
Depreciation 1,800 3,900 3 600 500 4(c),4(d) 5,800
14,550 16,950 31,600
Profit from trading 19,050 14,700 35,450
Proceeds from sale of plant 9,000 15,000 4(c),4(e) 24,000 -
Carrying amount of plant
sold 7,500 14,000 21,500 4(c),4(e) -
Gain/loss on sale of
machinery 1,500 1,000 -
Profit before tax 20,550 15,700 35,450
Tax expense 11,100 7,300 4(a),4(c)
,4(d) 330 570 3,4(b),4(
c) 18,160
Profit 9,450 8,400 17,290
Retained earnings (1/7/16) 48,000 31,500 1,3,4(a),
4(d) 22,250 780 3,4(d) 58,030
Retained earnings (30/6/17) 57,450 39,900 75,320
Share capital 96,000 66,000 1 66,000 96,000
BCVR - - 1 2,100 2,100 2 -
Total equity 153,450 105,900 171,320
Current liabilities 21,100 10,500 31,600
Deferred tax liability 11,000 15,000 3 360 900 2 26,540
Total liabilities 32,100 25,500 58,140
Total equity and liabilities 185,550 131,400 229,460
Plant 57,000 107,250 30,000 2,4(c),4(
d) 134,250
Accumulated depreciation (18,300) (33,450) 2,4(c),4(
d) 31,100 1,200 3 (21,850)
Intangibles 12,000 11,100 23,100
Shares in Brim Ltd 90,000 - 90,000 1 -
Deferred tax asset 8,100 9,450 17,550
Inventory 28,500 24,600 300 4(b) 52,800
Receivables 8,250 12,450 20,700
Goodwill - - 1 2,250 2,250