( ACC705 ) Assessment 1 Assessment Type: Mid-trimester test - individual assessment Purpose: This assessment is designed to allow students to demonstrate an understanding of accounting standards,...

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Answered Same DayMay 13, 2021ACC705

Answer To: ( ACC705 ) Assessment 1 Assessment Type: Mid-trimester test - individual assessment Purpose: This...

Pulkit answered on May 21 2021
149 Votes
Solution A
Acquisition analysis for Gilberts Ltd as at 1st July 2019
    Net fair value of identifiable assets and liabilities
    Particulars
    Amount
    Share capital
     $ 25,000.00
    Retained earnings
     $ 7,500.00
     
     $ 32,500.00
    Add: Increase in fair va
lue of inventory
     $ 1,000.00
    Less: Deferred tax liability on increase in inventory
     $ (300.00)
    Total
     $ 33,200.00
    Statement showing calculation of Net Consideration paid by Gilberts Ltd
    Particulars
    Amount
    Consideration paid by Gilberts Ltd
     $ 50,000.00
    Less: Payment for dividend
     $ 7,500.00
    Net Consideration paid by Gilberts Ltd
     $ 42,500.00
    Statement showing calculation of Goodwill or Gain on bargain purchase
    Particulars
    Amount
    Consideration paid by Gilberts Ltd
     $ 42,500.00
    Net fair value of identifiable assets and liabilities
     $ 33,200.00
    Goodwill/(GBP)
     $ 9,300.00
Solution B
    Journal Entries
     
    Particulars
    Debit
    Credit
     
     
     
     
    Business combination valuation entries
     
     
     
     
    1
    Inventory A/c
     $ 100.00
     
     
    Deferred tax liability A/c
     
     $ 30.00
     
    Business combination valuation reserve A/c
     
     $ 70.00
     
     
     
     
    2
    Cost of sales A/c
     $ 900.00
     
     
    Income tax expense A/c
     
     $ 270.00
     
    Business combination valuation reserve A/c
     
     $ 630.00
     
     
     
     
    3
    Goodwill A/c
     $ 9,300.00
     
     
    Business combination valuation reserve A/c
     
     $ 9,300.00
     
     
     
     
    
     
     
     
    Pre- acquisition equity entries
     
    At 1st July 2019
     
     
    4
    Share capital A/c
     $ 25,000.00
     
     
    Retained earnings A/c
     $ 7,500.00
     
     
    Business combination valuation reserve A/c
     $ 10,000.00
     
     
    Shares in Potoroo Ltd A/c
     
     $ 42,500.00
     
     
     
     
    5
    Dividend payable A/c
     $ 7,500.00
     
     
    Dividend receivable A/c
     
     $ 7,500.00
     
     
     
     
     
    At 30th June 2020
     
     
     
     
     
     
     5A
    Impairment loss A/c
     $ 8,000.00
     
     
    Goodwill A/c
     
     $ 8,000.00
     
     
     
     
     
    Share capital A/c
     $ 25,000.00
     
     
    Retained earnings A/c
     $ 7,500.00
     
     
    Business combination valuation reserve A/c
     $ 10,000.00
     
     
    Shares in Potoroo Ltd A/c
     
     $ 42,500.00
     
     
     
     
    Intragroup transactions entries
     
     
     
     
    6
    Retained earnings A/c
     $ 1,750.00
     
     
    Deferred tax asset A/c
     $ 750.00...
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