Acquisition Analysis as at 1 July, 2015 |
||
Net fair value of identifiable assets and liabilities of Zack Ltd. |
||
Share Capital |
1,50,000 |
|
General Reserve |
34,000 |
|
Retained Earnings |
20,000 |
|
Land ((155000-150000)*(1-30%)) |
3,500 |
|
Plant ((190000-175000)*(1-30%)) |
10,500 |
|
Inventory ((40000-32000)*(1-30%)) |
5,600 |
|
Provision for damages (8000*(1-30%)) |
(5,600) |
|
Recorded Goodwill |
(2,000) |
|
Net Fair Value |
2,16,000 |
|
Consideration given |
2,27,500 |
|
Goodwill |
11,500 |
|
Goodwill already recorded |
2,000 |
|
Net goodwill to be recorded |
9,500 |
|
Consolidation Worksheet entries as on 30 June, 2016 |
||
1. Business Combination Valuation Entries |
||
Land |
Dr. |
5,000 |
To Deferred Tax Liability |
Cr. |
1,500 |
To Business Combination Valuation Reserve |
Cr. |
3,500 |
(Being Land fair valued) |
||
Inventory |
Dr. |
8,000 |
To Deferred Tax Liability |
Cr. |
2,400 |
To Business Combination Valuation Reserve |
Cr. |
5,600 |
(Being Inventory fair valued) |
||
Accumulated Depreciation – Plant |
Dr. |
25,000 |
To Plant |
Cr. |
10,000 |
To Deferred Tax Liability |
Cr. |
4,500 |
To Business Combination Valuation Reserve |
Cr. |
10,500 |
(Being Plant fair valued) |
||
Depreciation |
Dr. |
5,000 |
To Accumulated depreciation |
Cr. |
5,000 |
(Being depreciation recorded) |
||
Deferred tax liability |
Dr. |
1,500 |
To Income tax expense |
Cr. |
1,500 |
(Being income tax expense on depreciation recorded) |
||
Cost of sales |
Dr. |
7,200 |
To Income tax expense |
Cr. |
2,160 |
To Transfer from business combination valuation reserve |
Cr. |
5,040 |
(Being 90% sale of inventory recorded) |
||
Accumulated impairment loss |
Dr. |
12,000 |
To Goodwill |
Cr. |
2,500 |
To Business combination valuation reserve |
Cr. |
9,500 |
(Being impairment of goodwill recorded) |
||
Business combination valuation reserve |
Dr. |
1,400 |
Deferred tax asset |
Dr. |
600 |
To Provision for damages |
Cr. |
2,000 |
(Being provision for damages recorded) |
||
Transfer from Business combination valuation reserve |
Dr. |
4,200 |
Income tax expense |
Dr. |
1,800 |
To Gain on reversal of provision of damages |
Cr. |
6,000 |
(Being reversal of excess provision of damags recorded earlier reversed) |
||
2. Pre-Acquisition Entries |
||
Share Capital |
Dr. |
1,50,000 |
General Reserve |
Dr. |
34,000 |
Retained Earnings (01.07.2015) |
Dr. |
20,000 |
Business Combination Valuation Reserve |
Dr. |
23,500 |
To Shares in Cathy Ltd. |
Cr. |
2,27,500 |
(Being purchase of shares of William Ltd. Recorded) |
||
Worksheet entries as on 30 June, 2016 |
||
1. Business Combination Valuation Entries |
||
The entries on 30 June, 2016 are effected by: |
||
– sale of inventory |
||
– remeasurment of provision of damages |
||
– transfer from general reserve to retained earnings |
||
– call of 10c per shares on issued shares |
||
Transfer from business combination valuation reserve |
Dr. |
5,040 |
To Business Combination Valuation Reserve |
Cr. |
5,040 |
(Being sale of inventory recorded) |
||
Transfer from business combination valuation reserve |
Dr. |
4,200 |
To Business Combination Valuation Reserve |
Cr. |
4,200 |
(Being remeasurement of provision for damages recorded) |
||
General Reserve |
Dr. |
17,000 |
To Retained earnings |
Cr. |
17,000 |
(Being amount transferred) |
||
Share capital |
Dr. |
10,000 |
To Shares in William Ltd. |
Cr. |
10,000 |
(Being share money called by William Ltd.) |
Statement of Profit or Loss
Black Hole Ltd. |
||
STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME |
||
For the year ended on June 30, 2018 |
||
(Amount in $) |
||
Particulars |
Notes |
For the year ended on |
Income from operations |
||
Sale of product |
8,25,000 |
|
Cost of sales |
(4,50,000) |
|
Gross Profit |
3,75,000 |
|
Other income |
14 |
6,000 |
Administration expenses |
(2,36,300) |
|
Other expenses |
(10,000) |
|
Interest expense |
(28,700) |
|
Profit before tax |
1,06,000 |
|
Less: Tax expense |
(50,400) |
|
Profit for the year |
55,600 |
|
Other comprehensive income |
||
Items that will not be classified to profit or loss: |
||
Gain on Revaluation of assets |
15 |
55,000 |
Income tax expense on OCI |
(16,500) |
|
Other comprehensive income for the year (net of tax) |
38,500 |
|
Total comprehensive income for the year |
94,100 |
Black Hole Ltd. |
||
Notes to the Financial Statements |
||
For the year ended on June 30, 2018 |
||
Note – 1: Cash and cash equivalents |
||
Particulars |
Amount |
|
Cash at bank |
500 |
|
Total |
500 |
|
Note – 2: Trade and other receivables |
||
Particulars |
Amount |
|
Accounts receivable |
58,000 |
|
Allowance for doubtful debts |
(12,800) |
|
Total |
45,200 |
|
Note – 3: Inventories |
||
Particulars |
Amount |
|
Inventories |
87,700 |
|
Total |
87,700 |
|
Note – 4: Other current assets |
||
Particulars |
Amount |
|
Prepaid Insurance |
7,000 |
|
Total |
7,000 |
|
Note – 5: Property, plant & equipment – Tangible assets |
||
Particulars |
Amount |
|
Land |
||
– cost |
2,20,000 |
|
Buildings |
||
– cost |
3,80,000 |
|
Plant and equipment |
||
– cost |
2,22,500 |
|
– accumulated dep |
(42,500) |
1,80,000 |
Total |
7,80,000 |
|
Note – 6: Property, plant & equipment – Intangible assets |
||
Particulars |
Amount |
|
Goodwill |
||
– cost |
1,05,000 |
|
– accumulated impairment loss |
(10,000) |
95,000 |
Total |
95,000 |
|
Note – 7: Borrowings |
||
Particulars |
Amount |
|
Current portion of mortgage loans |
50,000 |
|
Current portion of debentures |
80,000 |
|
Bank overdraft (at call) |
69,200 |
|
Total |
1,99,200 |
|
Note – 8: Trade and other payables |
||
Particulars |
Amount |
|
Accounts payable |
69,500 |
|
Total |
69,500 |
|
Note – 9: Current tax liability |
||
Particulars |
Amount |
|
Current tax liability |
52,100 |
|
Total |
52,100 |
|
Note – 10: Current provisions |
||
Particulars |
Amount |
|
Provision for employee benefits |
||
Annual leave |
18,000 |
|
Total |
18,000 |
|
Note – 11: Other liabilities |
||
Particulars |
Amount |
|
Dividend payable |
10,000 |
|
Interest payable |
2,800 |
|
Total |
12,800 |
|
Note – 12: Non-current Borrowings |
||
Particulars |
Amount |
|
Mortagage Loans |
2,50,000 |
|
Less: Current portion of mortgage loans |
(50,000) |
2,00,000 |
7% debentures |
80,000 |
|
Less: Current portion of debentures |
(80,000) |
– |
Total |
2,00,000 |
|
Note – 13: Non-current Provisions |
||
Particulars |
Amount |
|
Provision for employee benefits |
||
Long-service leave |
16,200 |
|
Total |
16,200 |
|
Note – 14: Other Income |
||
Particulars |
Amount |
|
Interest revenue |
2,500 |
|
Dividends revenue |
3,500 |
|
Total |
6,000 |
|
Note – 15: Gain on Revaluation of assets |
||
Particulars |
Amount |
|
Gain on Revaluation of Land |
25,000 |
|
Gain on Revaluation of Building |
30,000 |
|
Total |
55,000 |
Black Hole Ltd. |
||
STATEMENT OF FINANCIAL POSITION |
||
For the year ended on June 30, 2018 |
||
(Amount in $) |
||
Particulars |
Notes |
As at |
Current assets |
||
Cash and cash equivalents |
1 |
500 |
Trade and other receivables |
2 |
45,200 |
Inventories |
3 |
87,700 |
Other current assets |
4 |
7,000 |
Total current assets |
1,40,400 |
|
Non-current assets |
||
Property, plant and equipment |
||
– Tangible assets |
5 |
7,80,000 |
– Intangible assets |
6 |
95,000 |
Deferred tax assets |
9,800 |
|
Total non-current assets |
8,84,800 |
|
Total assets – (a) |
10,25,200 |
|
Current liabilities |
||
Borrowings |
7 |
1,99,200 |
Trade and other payables |
8 |
69,500 |
Current tax liabilities |
9 |
52,100 |
Provisions |
10 |
18,000 |
Other liabilities |
11 |
12,800 |
Total current liabilities |
3,51,600 |
|
Non-current liabilities |
||
Borrowings |
12 |
2,00,000 |
Provisions |
13 |
16,200 |
Deferred tax liability |
18,400 |
|
Total non-current liabilities |
2,34,600 |
|
Total liabilities – (b) |
5,86,200 |
|
Net assets (a-b) |
4,39,000 |
|
Equity |
||
Contributed equity |
2,00,000 |
|
Retained earnings |
1,29,000 |
|
Revaluation reserves |
85,000 |
|
General reserve |
25,000 |
|
Total equity |
4,39,000 |
Black Hole Ltd. |
|||||
Statement of Changes in Equity |
|||||
For the year ended on June 30, 2018 |
|||||
Particulars |
Share Capital |
Retained Earnings |
Revaluation Surplus |
General Reserve |
Total |
Balance as at 1 July, 2017 |
1,00,000 |
1,28,400 |
46,500 |
– |
2,74,900 |
Profit for the year |
55,600 |
55,600 |
|||
Other comprehensive income |
38,500 |
38,500 |
|||
Total comprehensive income for the year |
|||||
Shares issued during the year |
1,00,000 |
1,00,000 |
|||
Transfer to general reserve |
(25,000) |
25,000 |
– |
||
Transactions with owners in their capacity as owners: |
|||||
– dividends paid |
(20,000) |
(20,000) |
|||
– dividends provided for |
(10,000) |
(10,000) |
|||
Balance as at June 30, 2017 |
2,00,000 |
1,29,000 |
85,000 |
25,000 |
4,39,000 |
References
Porter, G & Norton, C 2014, Financial Accounting: The Impact on Decision Maker, Texas: Cengage Learning
Shah, P 2013, Financial Accounting, London: Oxford University Press
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