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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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