200109 Queensland Ltd. Acquisition Analysis Assignment Sample

Subject Code : 200109
University : Western Sydney University My Assignment Services is not sponsored or endorsed by this college or university.
Subject Name : General Accounting and Finance

Corporate Accounting Systems - Part A

a) Acquisition Analysis at 1^st July’2018

Acquistion Analysis
Book value of Net Assets	$
Share Capital	235,000
Retained Earnings	115,000
Total book value of net assets	350,000

Add: Fair Value Adjustments	Nil
FVINA (a)	350,000
Purchase Consideration (b)	650,000
Goodwill (b)-(a)	300,000

b) Adjustments/Elimination Journal entries for Consolidation as at 30^th June’2019

BCVR journal entries as at 30^th June’2019

Particulars	Dr. $	Cr. $
Goodwill	300,000
Business Combination Valuation Reserve		300,000
(Recognition of Goodwill arising at acquisition of Queensland Retail Ltd.)

Pre-Acquisition Journal entries at 30^th June’2019

Particulars	Dr. $	Cr. $
Share Capital	235,000
Retained Earnings	115,000
Business Combination Valuation Reserve	300,000
Investment in Queensland Retail Ltd.		650,000
(Pre-Acquisition Journal Entry for elimination of Investment in Queensland Retail Ltd.)

Elimination Entries at 30^th June’2019

Particulars	Dr. $	Cr. $
1. a) Gain on Sale of Machinery	36,000
Machinery		36,000
(Elimination of gain on Intra group sale)

b) Deferred Tax Asset	10,800
Income Tax Expense		10,800
(Reversal of Income tax expense due to elimination of Intragroup gain)

c) Accumulated Depreciation	3,750
Depreciation		3,750
(Reversal of Depreciation Expense on account of Elimination of intragroup gain and corresponding Adjustment in value of machinery)

d) Income Tax Expense	1,125
Deferred Tax Asset		1,125
(Recognition of Income tax expense due to reversal of Depreciation)

2. a) Sales Revenue	50,000
Cost of Sales		46,000
Inventory		4,000
(Elimination of profit on intragroup sale of inventory)

b) Deferred Tax Asset	1,200
Income Tax Expense		1,200
(Reversal of Income Tax Expense due to elimination of profit On intragroup sale of inventory)

a) Acquisition Analysis at 30^th June’2020

Acquistion Analysis
	$
Share Capital	550,000
Retained Earnings	100,000
Revaluation Surplus	150,000
Total	800,000

Add: Fair Value Adjustments
Plant 26,000(1-0.3)	18,200

FVINA (a)	818,200
Share of Wholesale Ltd. (80%)	654,560
Purchase Consideration (b)	800,000
Fair Value of NCI (c)	163,640
Goodwill (b) +(c)-(a)	145,440

Calculation of NCI

Share Capital (550,000*.2) = 110,000

Retained Earnings (100,000*.2)= 20,000

Revaluation Surplus(150,000*.2)= 30,000

Fair Value Adjustments(18,200*.2)= 3,640

________

$ 163,640

b) Adjustments/Elimination Journal entries for Consolidation as at 30^th June’2020

Pre-Acquisition Journal Entries as on 30^th June’2020

Particulars	Dr. $	Cr. $
Share Capital	440,000
Retained Earnings	80,000
Revaluation Reserve	120,000
Business Combination Valuation Reserve	160,000
Investment in House Construction Ltd.		800,000
(Pre-Acquisition Journal Entry for elimination of Investment in House Construction Ltd.)
Share Capital	110,000
Retained Earnings	20,000
Revaluation Surplus	30,000
Business Combination Valuation Reserve	3,640
Non-Controlling Interest		163,640

BCVR journal entries as at 30^th June’2020

Particulars	Dr. $	Cr. $
Goodwill	145,440
Business Combination Valuation Reserve		145,440
(Recognition of Goodwill arising at acquisition of Queensland Retail Ltd.)
Accumulated Depreciation	85,000
Plant		59,000
Deferred Tax Liability		7,800
Business Combination Valuation Reserve		18,200
(Recording Plant at fair value on acquisition)

In addition to above Journal entries, Pre-acquisition journal entries and BCVR journal entries on account of acquisition of Queensland ltd. as given in I. b) above shall also be made.

Elimination Entries at 30^th June’2020

	Dr. $	Cr. $
1. a) Retained Earnings (1/7/19)	36,000
Machinery		36,000
(Elimination of gain on Intra group sale)

b) Deferred Tax Asset	10,800
Retained Earnings (1/7/19)		10,800
(Reversal of Income tax expense (2018-19) due to elimination of Intragroup gain)

c) Accumulated Depreciation	8,250
Depreciation		4,500
Retained Earnings (1/7/19)		3,750
(Reversal of Depreciation Expense on account of Elimination of intragroup gain and corresponding Adjustment in value of machinery)

d) Income Tax Expense	1,350
Retained Earnings (1/7/19)	1,125
Deferred Tax Asset		2,475
(Recognition of Income tax expense due to reversal of Depreciation)

2. a) Sales Revenue	70,000
Cost of Sales		65,500
Inventory		4,500
(Elimination of profit on intragroup sale of inventory)

b) Deferred Tax Asset	1,350
Income Tax Expense		1,350
(Reversal of Income Tax Expense due to elimination of profit On intragroup sale of inventory)

3. Consultancy fee Payable	3,000
Consultancy fee receivable		3,000
(Reversal of Intragroup transaction)

4. Loan Payable	55,000
Loan Receivable		55,000
(Reversal of Intragroup transaction)

5. Interest Revenue	1,925
Interest Expense		1,925
(Reversal of Intragroup revenue and expense)

6. Retained Earnings (1/7/19)	10,000
Impairment on Goodwill	15,000
Accumulated Impairment		25,000
(Recognition of Impairment loss expense on Goodwill)

Corporate Accounting Systems - Part B

There are many benefits associated with acquiring a business in same industry. The primary advantage is that acquiror company can create economies of scale, which can be achieved by increasing production by reducing production costs. The other advantage is that company can implement same marketing and sales strategies for the new company, which can lead to reduced costs and boosting productivity.

However, if the business being acquired is from a different industry, it has many challenges associated with it.

Since, the acquiror company may not have experience in the industry of acquiree company, it may not be able to fully leverage the potential advantages of the acquisition which may even cause the performance of the acquiror company to go down after the acquisition. It may cause serious setback to acquiror company in terms of profitability. To overcome this challenge, acquiror company may consider to hire senior people in the management who have the relevant experience in the industry in which acquiree company operates, so that they may provide suitable guidance and advice to senior management in terms of business decisions.

Another disadvantage is that acquisition may shift the focus from the core business of acquiror and which may lead to reduced performance. This disadvantage may be overcome by doing proper resource planning for different verticals and budgetary exercises. Prompt action should be taken for significant deviations from the budget. The common costs should be appropriately and correctly allocated to different verticals of the business.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help