Accounting 1

Accounting

Students Name

Institution

Date
 Accounting 2

Question 1

Acquisition analysis at Acquisition date.

Acquisition analysis at 1July 2019

Fair value of identifiable assets and
liabilities (Share capital) 1208000
General reserves 518000
Asset Valuation Surplus 414000 On 1st July 2019 Ethan had the full control
Total 2140000 of Davis Ltd because he acquired more
Inventories 289800 than 50% of Davis holdings. The
Land 579600 purchases considerations are 91%
Plant 676200
ownership by Ethan which equals
Fittings 875
$3,450,000(Flint, Seymour and
Liabilities -50000
Chikurunhe, 2017).
Total 1496475
Total 3636475 The analysis of the net identifiable assets
Considerations transferred 3450000
at fair values is total equity 3,777,283.
9.00% 327282.75
Ethan's share of the net identifiable assets
Total 3777282.75
Goodwill 140807.75 is 9% of $3,363,475 which is $3,27,283.

Therefore, goodwill is $140,808.

Question 2

Business combination valuation entries and pre-acquisition entry at acquisition

date

Business combination valuation entries(JaeHo Im, 2019)

Business combination valuation entries

Dr $ Cr $
Plant( accumulated depreciation) 242000
Plant 242000
Deferred tax Liability 289800
Business combination reserve 676200

Depreciation Expense 96600

Retained earnings 48300
Accumulated Depreciation 144900

Deferred tax Liability 43470

Income tax Expense 28980
Retained earnings 14490
 Accounting 3

Land 828000
Deferred tax Liability 248400
Business combination reserve 579600

Inventories 414000
Deferred tax Liability 124200
289800

Fittings( accumulated depreciation) 625

Fittings 625
Deferred tax Liability 375
Business combination reserve 875

Goodwill 408975
Business combination reserve 408975

Pre-acquisition entry at acquisition date

Pre-acquisition entries Dr $ Cr $
Share capital 1208000
General reserves 518000
Goodwill 140808
Ethan Acquired shares 3450000

Question 3

Journal entries to recognize NCI at 1st July 2019

(Casajus and Labrenz, 2017)The Non-Controlling Interest in the transactions of Ethan

as an acquirer of Davis Ltd Limited the NCI is 9% (100% - 91%).

NCI share of equity at 1st July 2019;

NCI share of equity at 1 July 2019 Dr $ Cr $

Share capital 108720

General reserves 46620

Asset Valuation Surplus 37260

Business combination reserve 113100

 Accounting 4

Non-Controlling Interest 305700

Question 4

Consolidation Worksheet Entries at 30th June 2020, assuming a profit of $69000 at

the end of the year (Tsao, Matthews and Crittenden, 2012).

  Dr $ Cr $
Plant( accumulated depreciation) 242000  
Plant 242000
Deferred tax Liability   289800
Business combination reserve 194200
     
Depreciation Expense 96600
Retained earnings 48300  
Accumulated Depreciation 144900
     
Deferred tax Liability 43470
Income tax Expense   28980
Retained earnings 14490
     
Land 828000
Deferred tax Liability   248400
Business combination reserve 579600
     
Inventories 414000
Deferred tax Liability   124200
289800
     
Fittings( accumulated
625
depreciation)
Fittings 625  
Deferred tax Liability 375
Business combination reserve   875

Goodwill 408975  
Business combination reserve 408975
     
Pre-acquisition entries Dr $ Cr $
Share capital 1208000  
 Accounting 5

General reserves 518000

Asset Valuation Surplus 414000  
Business combination reserve 1727565
Ethan Acquired shares   3450000

Question 5

Explain how step 1 to 4 will change if the Full goodwill method is used.

There will be an extra Business Combination Valuation entry under the full goodwill
method compared to partial goodwill method (Davies, 2016). This is due to different
modes of recording in the balance sheet.

There will be an increase in the fair value used to value a given stock under the full
goodwill method compared to the partial method (Williams and Williams, 2015). The
difference is brought by the percentage of stock bought by Ethan.

The pre-acquisition changes under the full goodwill method compared to the partial
goodwill method.

References

Casajus, A. and Labrenz, H. (2017). Recognition of Non-Controlling Interest in

Consolidated Financial Statements Based on Property Rights. Review of Law &
Economics, 13(3).

Davies, P. (2016). Control Shifts via Share Acquisition Contracts with Shareholders.
SSRN Electronic Journal.
 Accounting 6

Flint, E., Seymour, A. and Chikurunhe, F. (2017). Defining Activeness: Active Share,
Risk Share & Factor Share. SSRN Electronic Journal.

JaeHo Im (2019). Share acquisition with another’s name and attribution to shareholder
rights. 법학연구, 60(3), pp.141-178.

Tsao, H., Matthews, L. and Crittenden, V. (2012). Balancing Market Share Growth and
Customer Profitability: Budget Allocation for Customer Acquisition and Retention.
Organizations and Markets in Emerging Economies, 3(2), pp.45-55.

Williams, C. and Williams, R. (2015). Optimizing acquisition and retention spending to

maximize market share. Journal of Marketing Analytics, 3(3), pp.159-170.