Best ACC204 Assignment sample

Best ACC204 Assignment sample

Task detail:

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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