ACCT6005 COMPANY

ACCOUNTING
Assessment 2 Case Study

[DATE]
STUDENT NAME
Student ID
Table of Contents
Part A.....................................................................................................................................................2
Part B.....................................................................................................................................................2
References.............................................................................................................................................5

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Part A
Issue 1 goodwill

1. The actual different between the liabilities and the assets are been overvalued which can
also be called as the impaired goodwill.
2. The amount of $ 5,000 should be written off as a loss in the income statement. It should be
debited in the goodwill account.
3. In the income statement, $ 40,000 should be accounted for under Dublin instead of being
recorded in Gal1. Fixing it under Dublin reduces total liability and equity.
4. If this error is not corrected, the assets and equity are not transferred to the Group, but all
assets and each liability individually debited $ 40000 on the balance sheet. The entire
benefit group does not however, in trading, total revenue and total costs may decreased
$40000 in the group Income statement.

Issue 2 Inventory

1. The incorrect inventory in that there is a different cost of sale and gross profit.
2. On 30 June 2020 Galway purchased a $ 25,000 Dublin inventory. Dublin bought inventory at
22,000.
In order to benefit from what Dublin has done we will take the difference in the purchase
price of the products traded by Dublin we deduct it from its selling price. 25,000-22,000 = $
3,000. Dublin earned $ 3,000.
3. The remaining inventory for Galway as of June 30, 2020 is the difference between the total
cost of purchase and the sales revenue. 25,000-18,750 = $ 6,250
4. Inventory will be 45,000 and we will add inventory to 32,000. This will amount to up to $
77,000 as the total inventory as of June 30, 2020.

Issue 3: Sale of equipment

1. Galway makes the equipment for Dublin at 160,000. Galway bought 120,000-120,000 items
for sale. This makes him lose between 160,000-120,000 = $ 40,000.
2. The amount calculated for depreciation requires the cost of allocating the equipment
according to its useful life.
3. Remove passing entries from the worksheet to remove this in the group exchange because it
is not an exchange with other parties:
 Dr. Interest is payable
 Cr Interest rates
 Cr Interest rates received
4. The remaining useful life is 1 year-2 years = 8 years, less than two years because Galway only
used the equipment for two years.
In the case of Dublin, the depreciation will be 120,000/8 = $ 15,000 per year.

Issue 4: Dividends Parts and declared

1. The dividend revenue, dividend payable and dividend received is incorrect.

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 2. The dividend payable is $54,000 and the total revue is the $20,000.
3. The amount calculated for depreciation divided by the cost of the equipment over the useful
life.
4. If this error is not corrected, the assets and equity are not transferred to the Group, but all
assets and each liability individually debited $ 540000 on the balance sheet. The entire
benefit group does not however, in trading, total revenue and total costs may decreased $
20000 in the group Income statement.

Issue 5: Service Fees

1. The service fees is given incorrect.

2. Galway charged Dublin $ 90,000 for surface fees. On June 30, 2020, 90% of this was paid
90% x90,000 = 81,000
3. Galway must record the unpaid amount as a debt in the income statement. The debt will be
the difference between the amount charged and the amount paid. 90,000-81,000 = $ 9,000.
4. If this error is not corrected, the assets and equity are not transferred to the Group, but all
assets and each liability individually debited $ 81000 on the balance sheet. The entire
benefit group does not however, in trading, total revenue and total costs may decreased $
81000 in the group Income statement.

Part B
Based on the given case scenario and the worksheet in Part A the below worksheet has been
prepared.

Galway Dublin Ref Adjustments Ref Group

Ltd ($) Ltd ($) ($)
Dr Cr
($) ($)
Sales revenue 180 000 131 2 25000 2,86,000
000
Cost of sales (88 000) (58 22000 2 (1,24,000)
000)
Gross profit 92 000 73 000 3,000 1,62,000
Dividend 24 000 -- 4 18,000
revenue (20,000)
4 26,000
Service fee 90 000 5 90000 -
revenue
Proceeds from -- 148 3 1,20,000 28,000
sale 000
of equipment
Depreciation (12 000) (8 000) 1000 3 (19000)
Impairment loss -- -- 1 5000 (5000)
-
Goodwill
Carrying amount -- (40 118000 3 78000

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 of 000)
equipment sold
Service fee (90 90,000 5 -
expense 000)
Other expenses (32 000) (15 27,000
000)
Profit before tax 162 000 68 000 197000
Less: Income tax (48 600) (20 3 300 2100 2 (67,200)
expense 400)
Profit for the 113 400 47 600 129800
year
Retained 72 000 80 000 1 80,000 72000
earnings
(1/7/19)
Dividend paid -- (18 18,000 4 -
000)
Dividend (26,000) -- 26,000 4 -
declared
Retained 159 400 109 269000
earnings 600
(30/6/20)
Share capital 165 000 95 000 1 95000 165000
General reserve 30 000 25 000 1 25000 30000
BCVR -- -- 1 45000 45000 1 -
Shareholders’ 354 400 229 1,038,800
equity 600

Liabilities
Accounts 37 000 3 000 40000
payable
Other Payables 24 600 9 000 33600
Dividend 26 000 -- 4 26000 52000
payable
Deferred Tax 50 000 11 000 66000
liability
Total liabilities 137 600 23 000 191600
Total 492 000 252 1,230,400
liabilities & 600
Equity
Galway Dublin Ref Dr ($) Cr ($) Ref Group ($)
Ltd ($) Ltd ($)
Assets

Cash 25 000 22 600 47,600

Accounts 12 000 8 000 20,000

receivable
Dividend 52 000 -- 26,000 52,000

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 receivable
Other 9 000 12 000 2100
receivables
Inventories 45 000 22 000 3000 64000

Investment 240 000 -- 240000 240000

in Dublin
Ltd
Land 52 000 84 000 136000

Equipment 60 000 78 000 2000 136000

Acc’d (38 000) (26 3 1000 65000

depreciation 000)
Buildings 55 000 62 000 117000

Acc’d (20 000) (15 35000

depreciation 000)
Goodwill -- 5 000 1 45000 50000

Less: Acc’d -- -- 5000 1 (5000)

imp’t loss
- Goodwill
Deferred tax -- -- 2 2100 300 3 1800
asset
Total assets 492 000 252 1,230,400
600

Galway Ltd share purchase from Dubin ltd. from 1 - July -2019. At the time of acquisition Dubin ltd
the bonus was $ 25,000 and is expected to receive $ 80,000. Purchase Galway at $ 2,40,000. The tax
rate is 30%.

In
the
book
s of
YY
Ltd
Consolidated
Statement of
Comprehensi
ve income as
on 31st
October, 2020
Particulars YY Ltd ZZ Ltd Consolidation
Sale $           $ 84,000.00 =150000+84000-3500-
150,000.00 7000 =223500

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 Less Cost of sale $           60,000.00 $ 27,000.00 =60000+27000-6000 =
81000
Gross Profit $              $ 57,000.00 $                          
90,000.00 142,500.00
Less Operating Exp. $              $ 18,600.00 =25800+18600 =44400
25,800.00
Profit before $               $ 38,400.00 $                                  
Tax 64,200.00 98,100.00
Less Tax $              $    7,200.00 =12000+7000= 19200
12,000.00
Profit for Tax $               $ 31,200.00 $                             78,900.
52,200.00 00

Particulars Amount ($)

Goods sold to ZZ Ltd $               7,000.00

Cost of Goods $ 4,000.00

Profit $                3,000.00

Unsold Good's stock in ZZ Ltd $                7,000.00

Unrealised profit Eliminated =3000*85% = 2550

Unrealised profit Eliminated from NCI =3000*15% = 450

Companies often move capital from the creation process to the annual investment process, where
everything is in need of financial constraints. Procedures have been developed to estimate revenues,
expenditures, and investment needs, and to set annual budget limits. Information on performance in
line with financial objectives. Phase I companies often employ strong business strategies but are less
receptive. Instead, they exist. The only clear indication of business strategy may be an estimate of
revenue growth, which is sometimes chosen for certain debt / equity or financial purposes. Designed
to meet the needs of hundreds of different and rapidly changing industries, operating thousands of
products / industries in dozens of different regions of the country, has led them to develop good
design process. However, these organizations do not differ much from the planning process as a
whole with which management links strategic plans for operational decisions.

Financial management is often about laying the groundwork for management or operational
decisions. A financial accounting system that provides information to outsiders known as “financial
analysis” and provides information for disclosures and potential investors and lenders such as banks
or retailers, financial analysts, financial analysts, and government agencies. Because these users
have different needs, the company’s financial statements are well organized and subject to far more
rules than financial management.

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References
[1] D. Hapsoro and A. Ambarwati, “Relationship Analysis of Eco-Control, Company Age, Company
Size, Carbon Emission Disclosure, and Economic Consequences,” The Indonesian Journal of
Accounting Research, vol. 23, no. 02, May 2020, doi: 10.33312/ijar.487.

[2]mJ. Seehausen, “Accounting Concepts in Company Law,” European Company and Financial Law
Review, vol. 18, no. 3, pp. 398–427, Jun. 2021, doi: 10.1515/ecfr-2021-0019.

[3] L. A. Cooper, J. A. DiGabriele, R. A. Riley, and T. L. Sorensen, “Company-Specific Risk and Small
Company Valuation,” Journal of Forensic Accounting Research, May 2021, doi: 10.2308/jfar-19-026.

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