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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