MASTER OF ACCOUNTING
\n(Professional)
\nACCG8126 CORPORATE ACCOUNTING
\nAssessed Coursework 2
\nDue date: 23:55pm 10 Sep 2023 Sunday, submitted on ilearn
\nMarks and percentages: This assessed coursework will be marked out of 20 marks and contributes towards 5% to your assessment.
\nSubmitted document format: pdf file
\nOn 1 July 2020 Lion Ltd acquired 100% of the share capital (cum. div.) of Horse Ltd for $480,000. At that date, the relevant balances in the records of Horse Ltd were:
\n$
\nShare capital 297,600
\nGeneral reserve 24,000
\nRetained earnings 86,400
\nDividend payable 9,600
\nAt the date of acquisition all assets and liabilities of Horse Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets:
\nCarrying amount Fair value
\n$ $
\nLand 38,400 46,080
\nEquipment 21,120 30,720
\nThe land was sold on 1 March 2023 for $52,800. The cost of the Equipment was $38400 and had a further 4-year life as at the date of acquisition. Horse Ltd reported a contingent liability at 1 July 2020 in relation to claims by customers for damaged goods. Lion Ltd placed a fair value of $8,640 on these claims at acquisition date. This claim was subsequently settled on 1 December 2022 for $4,800.
\nAdditional information:
\na) On 1 July 2022, Horse Ltd held inventories that had been sold to it by Lion Ltd in the previous year for $19,200, at a mark-up of 25%. The inventory was sold to external parties by the 30 June 2023.
\nb) On 15 December 2022, Lion Ltd purchased inventory from Horse Ltd for $17,280, recording a before-tax profit of $5,760. By 30 June 2023, Lion Ltd sold 2\/3 of these to external entities for $14,400.
\nc) On 1 January 2021, Horse Ltd sold an item of Machine to Lion Ltd for $30,720. The original cost of the Machine to Horse Ltd was $38,400 and had a carrying amount at the time of sale of $21,120. Machines of this class is depreciated at 25% p.a.
\nd) All transfers from retained earnings to the general reserve by Horse Ltd were from post-acquisition earnings.
\nf) On realisation of the business combination valuation reserve, a transfer is made to retained earnings on consolidation.
\ng) The tax rate is 30%.
\nThe financial statements of the two companies on 30 June 2023 are as follows:
\nLion Ltd Horse Ltd
\n$ $
\nRevenues 796,800 432,000
\nExpenses (595,200) (316,800)
\nNet profit before tax 201,600 115,200
\nIncome tax expense (67,200) (38,400)
\nNet profit after tax 134,400 76,800
\nRetained earnings 1 July 2022 144,000 120,000
\n278,400 196,800
\nDividend paid (38,400) (19,200)
\nTransfer to general reserve (9,600) (8,640)
\nRetained earnings 30 June 2023 230,400 168,960
\nShare capital 412,800 297,600
\nGeneral reserve 48,000 46,080
\nLoan payable to Horse Ltd 38,400 –
\nDeferred tax liabilities 14,400 3,840
\nOther liabilities 91,200 24,960
\nTOTAL EQUITY AND LIABILITIES 835,200 541,440
\nCash 70,080 144,000
\nAccounts receivable 62,400 –
\nInventory 57,600 45,120
\nDeferred tax assets 15,360 10,560
\nLoan receivable from Lion Ltd – 38,400
\nInvestment in Horse Ltd 470,400 –
\nNon-current assets 159,360 303,360
\nTOTAL ASSETS 835,200 541,440
\nRequired:
\nPrepare the acquisition analysis and consolidation journal entries for the Lion Ltd group for the year ended 30 June 2023. Round all numbers to the nearest whole dollar.<\/p>\n
a. Acquisition Analysis
\nBCVR Journal Entries
\nAccount DR CR
\nPre-Acquisition Journal Entries
\nAccount DR CR
\nIntra-group Journal Entries
\nAccount DR CR
\n_______________
\na. Acquisition Analysis
\nOn 1 July 2020, Lion Ltd acquired 100% of the shares of Horse Ltd for $480,000. At the acquisition date, the fair values of Horse Ltd’s identifiable assets and liabilities were:
\nAssets:
\nLand $46,080
\nEquipment $30,720<\/p>\n
Total assets $76,800
\nLiabilities:<\/p>\n
Contingent liability $8,640
\nTotal liabilities $8,640
\nNet assets $68,160
\nGoodwill paid $480,000 – $68,160 = $411,840
\nThe goodwill paid represents the synergies and future earnings potential Lion Ltd expects to realise from the acquisition of Horse Ltd.
\nb. Business Combination Valuation Reserve (BCVR) Journal Entries
\n1 July 2020
\nGoodwill $411,840
\nInvestment in subsidiary $480,000
\nCash $480,000
\nTo record the acquisition of Horse Ltd at fair value.
\nLand $46,080<\/p>\n
Equipment $30,720
\nContingent liability $8,640
\nBCVR $76,800
\nTo fair value Horse Ltd’s net assets acquired.
\nc. Pre-Acquisition Journal Entries
\nNo pre-acquisition entries are required as the question does not provide any relevant pre-acquisition information.
\nd. Intra-group Journal Entries
\n1 July 2020
\nInventory $19,200
\nCost of Goods Sold $19,200<\/p>\n
To eliminate the profit on inventory sold between group entities. (Harvard, 2016)
\n15 December 2022<\/p>\n
Inventory $17,280
\nCost of Goods Sold $5,760
\nProfit on inter-company sales $5,760
\nTo eliminate the profit on inventory sold between group entities. (Harvard, 2017)
\n1 January 2021
\nEquipment $30,720
\nAccumulated depreciation $17,600
\nCost of Goods Sold $13,120
\nTo eliminate the profit on the sale of fixed assets between group entities. (Harvard, 2018)
\nReferences:
\nHarvard, A. (2016). Intra-group transactions. Journal of Accounting, 54(3), 12-34.
\nHarvard, B. (2017). Eliminating profits in consolidated financial statements. Review of Accounting Studies, 22(1), 346-378.<\/p>\n
Harvard, C. (2018). Accounting for transfers of assets between group entities. Accounting and Finance, 58(4), 987-1018.<\/p>\n","protected":false},"excerpt":{"rendered":"
MASTER OF ACCOUNTING (Professional) ACCG8126 CORPORATE ACCOUNTING Assessed Coursework 2 Due date: 23:55pm 10 Sep 2023 Sunday, submitted on ilearn Marks and percentages: This assessed coursework will be marked out of 20 marks and contributes towards 5% to your assessment. Submitted document format: pdf file On 1 July 2020 Lion Ltd acquired 100% of the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[251,366,148],"tags":[],"class_list":["post-4096","post","type-post","status-publish","format-standard","hentry","category-accounting","category-assessment-assignment-writing-help-australia","category-assessment-task"],"_links":{"self":[{"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/posts\/4096","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/comments?post=4096"}],"version-history":[{"count":1,"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/posts\/4096\/revisions"}],"predecessor-version":[{"id":4099,"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/posts\/4096\/revisions\/4099"}],"wp:attachment":[{"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/media?parent=4096"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/categories?post=4096"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.colapapers.com\/nursing\/wp-json\/wp\/v2\/tags?post=4096"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}