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ACC567 Financial Accounting 2

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ACC567 Financial Accounting 2

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Course Code: ACC567
University: Charles Sturt University

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: Australia

Question:

Learning outcomes
On successful completion of this subject, you should:

be able to explain the relationships that exist between a parent company and itssubsidiary(ies), an investor and its investee, a company and its overseas subsidiaries;
be able to prepare accounts for each of the above-mentioned business combinations in accordance with relevant professional and statutory reporting requirements;
be able to discuss the relevant accounting standards and statutory reporting requirements for foreign currency dealings, segment reporting, and leases; and
be able to critically assess and report upon the information contained within published financial statements.

Answer:

Answer 1
Acquisition analysis

Share capital

 $   80,000

Retained earnings

 $   29,600

General reserve

 $     2,400

Consumer list

 $   12,600

Plant

 $     2,800

Inventory

 $     2,100

Land

 $     3,500

Net fair value of net assets

 $ 133,000

Less:

 

  Consideration

 $ 250,000

   Fair value of NCI

 $   28,000

Goodwill

 $ 145,000

Soda limited’s fair value

 $ 140,000

Net fair value of net assets

 $ 133,000

Soda limited’s goodwill

 $     7,000

Goodwill

 $ 145,000

Soda limited’s goodwill

 $     7,000

Pepsi -Control premium’s goodwill

 $ 138,000

Consolidation worksheet entries
BCVR entries

Plant Account

Dr.

 $     4,000

 

Deferred tax liability Account

Cr.

 

 $     1,200

BCVR Account

Cr.

 

 $     2,800

Depreciation expense Account

Dr.

 $        400

 

Retained earnings Account

Dr.

 $        800

 

Accumulated depreciation account

Cr.

 

 $     1,200

Deferred tax liability Account

Dr.

 $        360

 

Income tax expense Account

Cr.

 

 $        120

Retained earnings Account

Cr.

 

 $        240

Land Account

Dr.

 $     5,000

 

Deferred tax liability Account

Cr.

 

 $     1,500

BCVR Account

Cr.

 

 $     3,500

Consumer list Account

Dr.

 $   18,000

 

Deferred tax liability Account

Cr.

 

 $     5,400

BCVR Account

Cr.

 

 $   12,600

Goodwill Account

Dr.

 $     7,000

 

BCVR Account

Cr.

 

 $     7,000

Pre-acquisition entries

at 1 July 2015

 

 

 

Retained earnings Account

Dr.

 $   23,680

 

Goodwill Account

Dr.

 $ 138,000

 

BCVR Account

Dr.

 $   22,400

 

Share capital Account

Dr.

 $   64,000

 

General reserve Account

Dr.

 $     1,920

 

Investment in Soda Account

Cr.

 

 $ 250,000

at 30 June 2018

 

 

 

Retained earnings Account

Dr.

 $   25,360

 

Goodwill Account

Dr.

 $ 138,000

 

Share capital Account

Dr.

 $   64,000

 

BCVR Account

Dr.

 $   20,720

 

General reserve Account

Dr.

 $     1,920

 

Investment in Soda Account

Cr.

 

 $ 250,000

NCI share of equity at acquisition date

Share capital Account

Dr.

 $   16,000

 

General reserve Account

Dr.

 $        480

 

Retained earnings Account

Dr.

 $     5,920

 

BCVR Account

Dr.

 $     5,600

 

NCI Account

Cr.

 

 $   28,000

Changes in equity’s NCI share

Retained earnings Account

Dr.

 $     1,280

 

BCVR Account

Cr.

 

 $        420

NCI Account

Cr.

 

 $        860

NCI share of profit Account

Dr.

 $     2,880

 

NCI Account

 

 

 $     2,880

NCI Account

Dr.

 $     1,600

 

Dividend paid Account

Cr.

 

 $     1,600

NCI Account

Dr.

 $        800

 

Dividend declared Account

Cr.

 

 $        800

Movements in fair value [OCE] Account

Dr.

 $        320

 

NCI Account

Cr.

 

 $        320

Dividend paid and declared

Dividend revenue Account

Dr.

 $     6,400

 

Dividend paid Account

Cr.

 

 $     6,400

Dividend revenue Account

Dr.

 $     3,200

 

Dividend declared Account

Cr.

 

 $     3,200

Dividend payable Account

Dr.

 $     3,200

 

Dividend receivable Account

Cr.

 

 $     3,200

Unrealized profit in inventory

Retained earnings

Dr.

 $     1,400

 

Income tax expenses

Dr.

 $        600

 

Cost of sale

Cr.

 

 $     2,000

Sales

Dr.

 $   48,000

 

Cost of sale

Cr.

 

 $   44,000

Inventory

Cr.

 

 $     4,000

Deferred tax assets

Dr.

 $     1,200

 

Income tax expenses

 

 

 $     1,200

NCI adjustment

NCI

Dr.

 $        560

 

NCI share of profit

Cr.

 

 $        560

Non-current asset transfer

Retained earnings

Dr.

 $     2,800

 

Deferred tax assets

Dr.

 $     1,200

 

Plant

Cr.

 

 $     4,000

NCI

Dr.

 $        560

 

Retained earnings

Cr.

 

 $        560

Depreciation on non-current asset transfer

Depreciation expense

Dr.

 $        400

 

Retained earnings

Cr.

 

 $        400

Income tax expenses

Dr.

 $        120

 

Deferred tax assets

Cr.

 

 $        120

 

 

 

 

Retained earnings

Dr.

 $          56

 

NCI

Cr.

 

 $          56

Intergroup service

Management and consulting fees

Dr.

 $     4,000

 

Administrative expenses

Cr.

 

 $     1,760

Manufacturing expense

Cr.

 

 $     2,240

Debentures

Debentures

Dr.

 $   80,000

 

Debentures in Soda Ltd

Cr.

 

 $   80,000

Debenture interest revenue

Dr.

 $     4,000

 

Financial expense

Cr.

 

 $     4,000

Interim Dividend paid

Dividend from Soda Ltd

Dr.

 $     6,400

 

Interim Dividend paid

Cr.

 

 $     6,400

 

 

 

 

Dividend payable

Dr.

 $     3,200

 

Dividend declared

Cr.

 

 $     3,200

Answer 2
Acquisition analysis

Share capital

 $ 560,000

Retained earnings

 $   54,000

Plant and equipment’s fair value adjustment

 $   14,000

Fair value of net assets

 $ 628,000

Assets acquired by Star Ltd (628000*35%)

 $ 219,800

Acquisition cost

 $ 300,000

Goodwill

 $   80,200

Consolidation entries

Investment in A Ltd

Dr.

 $ 300,000

 

Cash

Cr.

 

 $ 300,000

(Recording of acquisition of shares of A Ltd)

 

 

 

Equity in Investee Income

Dr.

 $     7,000

 

Investment in A Ltd

Cr.

 

 $     7,000

(Recording of amortization of plant and equipment)

 

 

 

Investment in A Ltd

Dr.

 $   44,100

 

Equity in Investee Income

Cr.

 

 $   44,100

(Accrue 35% of the reported earnings)

 

 

 

Dividend revenue

Dr.

 $   10,500

 

Investment in A Ltd

Cr.

 

 $   10,500

(Recording of  cash dividend)

 

 

 

Investment in A Ltd

Dr.

 $     9,800

 

Asset revaluation reserve

Cr.

 

 $     9,800

(Post-acquisition reserve)

 

 

 

Equity in Investee Income

Dr.

 $     3,500

 

Investment in A Ltd

Cr.

 

 $     3,500

(Recognition of unrealized gross profit)

 

 

 

Answer 3
Transaction 1

 Date

Particulars

 

 Amount 

  Amount 

13-06-18

Foreign customer Receivable

Dr.

 $ 99,713

 

 

Sales revenue

Cr.

 

 $  99,713

 

(Recording of sale transaction)

 

 

 

30-06-18

Foreign exchange loss

Dr.

 $   2,625

 

 

Foreign customer Receivable

Cr.

 

 $    2,625

 

(Recording of Foreign exchange loss)

 

 

 

10-07-18

Cash at bank

Dr.

 $ 95,398

 

 

Foreign exchange loss

Dr.

 $   1,689

 

 

Foreign customer Receivable

Cr.

 

 $  97,087

 

(Settlement of sale transaction)

 

 

 

Transaction 2

 Date

Particulars

 

 Amount 

  Amount 

15-06-18

Plant and equipment

Dr.

 $106,841

 

 

Payable to foreign supplier

Cr.

 

 $106,841

 

(Recording of purchase transaction)

 

 

 

30-06-18

Payable to foreign supplier

Dr.

 $    6,661

 

 

Foreign exchange gain

Cr.

 

 $    6,661

 

(Recording of Foreign exchange gain)

 

 

 

20-07-18

Payable to foreign supplier

Dr.

 $100,180

 

 

Foreign exchange loss

Dr.

 $  10,309

 

 

Cash at bank

Cr.

 

 $110,489

 

 (Settlement of sale transaction)

 

 

 

References
Deegan, C. (2012). Australian financial accounting. McGraw-Hill Education Australia.
Harris, T. S., & Rajgopal, S. (2018). Foreign Currency: Accounting, Communication and Management of Risks. Columbia Business School.

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