## Best ACC204 Assignment sample

On 1 July, 2019, Ethan Ltd acquired 100 % of the issued shares of James Ltd for \$ 72,000. http://Best ACC204 Assignment sampleThe equity of James Ltd at this date consisted of:

Share capital: \$50,000

Retained Earnings: \$5,000

General reserve: \$ 12,500

## The carrying amounts and fair values of the liabilities and assets

Carrying amount                  Fair value

Plant                                                       \$ 50,000                            \$ 52,000

Inventory                                                \$ 12,000                           \$ 16,000

## Acquisition analysis

Plant (BCVR): (\$ 52,000 – \$ 50,000) * 0.7 = \$ 1,400

Inventory (BCVR):  (\$ 16,000- \$ 12,000) * 0.7 = \$ 2,800

Net fair value related to identifiable assets and liabilities gained = \$ 50,000 + \$ 12,500.http://Best ACC204 Assignment sample
+ \$ 4,000 (1-30 %) + \$ 2,000 (1-30 %) = \$71,700

Net consideration transferred = \$ 72,000

Therefore, Goodwill can be calculated as the difference between net fair value and net consideration transferred. Goodwill = \$ 72,000 – \$ 71,700 = \$ 300

## Business combination valuation entries

Accumulated depreciation                                  Dr \$ 20,000

Plant                                                                    Cr                 \$ 2,000

Deferred tax liability                                           Cr                 \$ 600

Business combination of valuation reserve         Cr                 \$ 1,400

Inventory                                                               Dr \$ 4,000

Income tax expense                                               Cr                 \$ 1,200

Business combination valuation reserve transfer  Cr                 \$2,800

Goodwill                                                                Dr \$ 300

Business combination valuation reserve               Cr                  \$ 300

Pre-acquisition entries

Retained earnings                                                  Dr \$ 5,000

Share capital                                                          Dr \$ 50,000

General Reserve                                                    Dr \$ 12,500

BCVR                                                                    Dr \$ 4,500

Shares in the company                                           Cr                  \$ 72,000

## Recognition of NCI

Since the James Ltd is completely owned By Ethan Ltd., there would not be any NCI.http://Best ACC204 Assignment sample

If it would have acquired 75 % acquired by Ethan Ltd, then NCI would be = (100 % -75 %) * Net consideration transferred = 25 % * 72,000 = \$ 18,000

## Worksheet entries

BCV entries

Depreciation expense                                           Dr \$ 500

Income tax expense                                              Cr                     \$ 150

Retained earnings                                                 Dr \$ 1,050

BCVR transfer                                                      Cr                     \$ 1,400

Goodwill                                                               Dr \$ 300

BCV entry                                                             Cr                     \$ 300

Pre-acquisition entries

Retained earnings                                                  Dr \$ 7,800

Share capital                                                          Dr \$ 50,000

Reserves                                                                Dr \$ 12,500

BCVR                                                                    Dr \$ 1,700

Shares in the company                                          Cr                         \$ 72,000

BCVR                                                                   Cr                          \$ 1,400

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