Assignment Requirements
Solution
Answer 1.
Acquisition Analysis at 1 July 2019
| Net Fair Value of the identifiable assets and liabilities for Davis Ltd | |
| Equity | $ 1,120,000 |
| + BCVR-Inventories | $ 151,900 |
| + BCVR-Land | $ 303,800 |
| + BCVR-Vehicles | $ 354,200 |
| + BCVR-Fittings | $ – |
| – BCVR-Liabilities | $ – |
| = | $ 1,929,900 |
| Net consideration Transferred | $ 1,761,000.00 |
| + NCI in Davis Ltd | $ 192,990.00 |
| Good Will Acquired by Parent | $ 24,090.00 |
Answer 2.
Business Combination Valuation Entries
| Business Combination Valuation Entries | ||
| Debit | Credit | |
| Inventories | $ 217,000 | |
| Deferred Tax Liability | $ 65,100 | |
| Business Combination Reserve | $ 151,900 | |
| Debit | Credit | |
| Land | $ 434,000 | |
| Deferred Tax Liability | $ 130,200 | |
| Business Combination Reserve | $ 303,800 |
| Debit | Credit | |
| Vehicle | $ 506,000 | |
| Deferred Tax Liability | $ 151,800 | |
| Business Combination Reserve | $ 354,200 |
Pre-Acquisition entries
| Pre-Acquisition entries | ||
| Debit | Credit | |
| Retained Earnings | $ 249,300.00 | |
| Share Capital | $ 758,790.00 | |
| Business Combination Reserve | $ 728,820.00 | |
| Goodwill | $ 24,090.00 | |
| Share in Davis Ltd | $ 1,002,210.00 | $ 1,761,000.00 |
(Dagwell et al., 2015)
Answer 3.
Journal Entry to Recognize NCI
| NCI Equity | ||
| Debit | Credit | |
| Retained Earnings | $ 249,300.00 | |
| Share Capital | $ 758,790.00 | |
| Business Combination Reserve | $ 728,820.00 | |
| General Reserve | $ 24,090.00 | |
| NCI | $ 1,761,000.00 | |
Answer 4.
With Profit for Davis Ltd
| NCI Share of profit | ||
| Debit | Credit | |
| NCI Share of profit | $ 3,600.00 | |
| NCI | $ 3,600.00 | |
Answer 5.
The partial Goodwill method asks for recording of the goodwill as a percentage of the acquisition just made in comparison to the full goodwill method which records it as for the company as a whole including all the portion that the company has not bought (Verma, 2009). The change in the steps above would be;
Step 1.
| Net Fair Value of the identifiable assets and liabilities for Davis Ltd | |
| Equity | $ 1,120,000 |
| + BCVR-Land | $ 303,800 |
| + BCVR-Inventories | $ 6,000 |
| + BCVR-Vehicles | $ 506,000 |
| + BCVR-Fittings | $ – |
| – BCVR-Liabilities | $ – |
| = | $ 1,935,800 |
| Net consideration Transferred | $ 1,756,000.00 |
| + NCI in Davis Ltd | $ 1,935,800.00 |
| Good Will Acquired by Parent | $ 1,756,000.00 |
Step 2
| Business Combination Valuation Entries | ||
| Debit | Credit | |
| Inventories | $ 217,000 | |
| Deferred Tax Liability | $ 65,100 | |
| Business Combination Reserve | $ 151,900 | |
| Debit | Credit | |
| Land | $ 434,000 | |
| Deferred Tax Liability | $ 130,200 | |
| Business Combination Reserve | $ 303,800 |
| Debit | Credit | |
| Vehicle | $ 506,000 | |
| Deferred Tax Liability | $ 151,800 | |
| Business Combination Reserve | $ 354,200 |
| Pre-Acquisition entries | ||
| Debit | Credit | |
| Goodwill | $ 1,756,000.00 | |
| Share in Davis Ltd | $ 1,756,000.00 | |
Step 3
| NCI Equity | ||
| Debit | Credit | |
| General Reserve | $ 1,756,000.00 | |
| NCI | $ 1,756,000.00 | |
Step 4
| NCI Share of profit | ||
| Debit | Credit | |
| NCI Share of profit | $ 36,000.00 | |
| NCI | $ 36,000.00 | |
(Goyal & Goyal, 2012)
References
Dagwell, R., Wines, G. & Lambert, C., 2015. Corporate Accounting in Australia. 1st ed. Pearson Higher Education AU.
Goyal, V.K. & Goyal, R., 2012. Corpporate Accounting. 3rd ed. PHI Learning Pvt. Ltd.
Verma, K.K., 2009. Corporate Accounting. 1st ed. Excel Books India.
