Consolidation: Principles And Accounting Requirements

Acquisition analysis

Share capital Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	100,000
Retained earnings	175,000
Plant Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	21,000
Computer equipment	14,000
Net fair value of identifiable assets and liabilities	310,000

Net fair value of identifiable assets and liabilities	310,000
Consideration transferred	250,000
Bargain purchase	60,000

Pre-acquisition entries

Retained earnings	175,000
Share capital	100,000
BCVR	35,000
Gain on bargain purchase		60,000
Shares in Smarty Ltd.		250,000

Worksheet entries

Accumulated depreciation on plant	90,000
Plant		60,000
Deferred tax liability		9,000
BCVR		21,000

Depreciation expense	6,000
Accumulated depreciation		6,000

Deferred tax liability	1,800
Income tax expense		1,800

Accumulated depreciation on computer equipment	50,000
Computer equipment		30,000
Deferred tax liability		6,000
BCVR		14,000

Depreciation expense	4,000
Accumulated depreciation		4,000

Deferred tax liability	1,200
Income tax expense		1,200

Acquisition analysis

Share capital	120,000
General reserve	25,000
Retained earnings	55,000
Land	21,000
Inventories	5,320
Machinery	2,800
Vehicles	4,200
Net fair value of identifiable assets and liabilities	233,320

Consideration transferred	250,000
Net fair value of identifiable assets and liabilities	233,320
Goodwill	16,680

Goodwill	16,680
Goodwill recorded	15,000
Unrecorded goodwill	1,680

Worksheet entries

Post-acquisition entries

BCVR entries

Accumulated depreciation Machinery	34,000
Machinery		30,000
Deferred tax liability		1,200
BCVR		2,800

Depreciation expense	350
Retained earnings	1,050
Accumulated depreciation		1,400

Deferred tax liability	420
Income tax expense		105
Retained earnings		315

Land	30,000
Deferred tax liability		9,000
BCVR		21,000

Inventory	7,600
Deferred tax liability		2,280
BCVR		5,320

Accumulated depreciation Vehicles	11,000
Vehicles		5,000
Deferred tax liability		1,800
BCVR		4,200

Depreciation expense	700
Retained earnings	2,100
Accumulated depreciation		2,800

Deferred tax liability	840
Income tax expense		210
Retained earnings		630

Goodwill	1,680
BCVR		1,680

Sale of equipment

Equipment	3,000
Loss on sale of equipment		3,000

Income tax expense	900
Deferred tax asset		900

Depreciation expense	300
Accumulated depreciation		300

Deferred tax asset	90
Income tax expense		90

Sale of machinery classified as Inventory

Proceeds on sale of machinery	7,800
Carrying amount of plant sold		7,000
Cost of sales		800

Interest expenses intercompany adjustments

Interest income	2,000
Interest expenses		2,000

Inventory sale

Retained earnings	875
Income tax expense	375
Cost of sales		1,250

Transfer to general reserve

Retained earnings	5,000
General reserve		5,000

Pre-acquisition entries

Retained earnings	55,000
General reserve	25,000
Share capital	120,000
Business combination valuation reserve	50,000
Shares in Sing Song Ltd.		250,000

References

Australian Accounting Standards Board. (2015, July). AASB 10: Consolidated Financial Statements. Retrieved August 10, 2018, from https://www.legislation.gov.au: https://www.legislation.gov.au/Details/F2015L01617

Australian Accounting Standards Board. (2004, June). AASB 3: Business Combinations. Retrieved August 10, 2018, from https://www.legislation.gov.au: https://www.legislation.gov.au/Details/F2005B01399.

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