Answer To: Section A DownloadAssignment 2: Section A (DOC 157 KB)for more information on Snap Ltd. Required...
Preeta answered on Apr 19 2021
SECTION A: Journal Entries
Journal Entries
In the books of Snap Ltd
Date
Particulars
Amount in $ (Dr)
Amount in $ (Cr)
01.09.2019
Plant (112,000 – 32,000)
Land
Accounts receivable
Inventory
Brand
Goodwill (Balance)
To Accounts payable
To Loans
To Interest accrued
To Annual leave entitlements
To Common Stock
To Investment in Southern Pty Ltd
(Being assets and liabilities taken over)
80,000
35,800
44,800
28,000
10,000
213,400
24,800
41,200
22,800
13,000
80,000
230,200
Investment in Southern Pty Ltd
To Common Stock
To Artwork
To Cash
(Being purchase consideration paid)
230,200
86,400
58,000
85,800
01.09.2019
Legal and accounting costs
To Cash A/C
(Being legal and accounting costs paid)
1,300
1,300
01.09.2019
Share issuance costs
To Cash A/C
(Being share issuance costs paid)
700
700
Purchase Consideration:
Shares: [(2/3)*60,000]* $2.16 = $86,400
Artwork: = $ 58,000
Cash: To pay off left liabilities – Accounts payable = $24,800
Loans = $41,200
Interest accrued = $22,800
Annual leave entitlements = $13,000
$101,800
Cash in hand = $16,000
Additional cash paid $85,800
Total Purchase consideration = $230,200
Note: All the assets and the liabilities have been taken at the fair value and not at the book value. Except retained earnings and cash, all the rest of the assets and liabilities have been taken over. For plants, the accumulated depreciation has been deducted.
The purchase consideration has been paid through shares, artwork and cash.
Legal and accounting costs and share issuance costs have been paid by the company, Snap Ltd and so have been entered in the books.
SECTION B: Report to shareholders of Telstra Ltd
Executive Summary:
This report explores financial statement. At first an introduction has been given regarding the objectives of this report and the company discussed in this report, Telstra Ltd. Then the financial reporting of Telstra Limited related to the step acquisition of Ooyala has been discussed with reference to the annual report of 2014. Next, financial statement reporting of the company regarding investment in Ooyala, Videoplaza and Nativ has been discussed with reference to the annual report of 2015 has been discussed. After this, the acquired three companies were combined into one company and the accounting treatments related to that company with reference to the annual report of 2017 and 2018 have been discussed until it was sold in 2019.
After that the importance of the information depicted through the financial statement to different users of the financial statement has been discussed. In the end, conclusions have been drawn based on the study of the whole report.
1. Introduction:
Financial statement is a very important depiction of the financial position of the company. Mergers and acquisitions are part of every business and that has to be taken into account as per the accounting standards, rules and regulations. Mergers and acquisition lead to business combination which is very helpful in improving the experience, resources, capital, market share and ultimately profit in the company by achieving economies of scale. New markets can also be entered into often after business combination. In this report financial statement reporting of Telstra Ltd has been discussed for the acquisition of Ooyala, Videoplaza and Nativ and finally sale of Ooyala Holding Inc. The purchase considerations and the goodwill generated from the mergers and acquisitions have been depicted, which are an important part of business combination accounting (Bena and Li 2014).
Not only just to depict the mergers, acquisitions and other business combinations, but financial statement depict a lot of other vital information and are used by a lot of stakeholders in a company.
Telstra Corporation Limited is an Australian telecommunication company. It mainly operates telecommunications networks and markets voice, mobile, internet access along with pay television and other related products and services. It has it’s headquarter at Melbourne, Australia. It operates almost all over the world with around 26,000 employees.
2. Financial statement reporting regarding step acquisition of Ooyala:
Ooyala provide digital TV and video content through operators, broadcasters and media organisations to mass audience using any device. It uses analytics and also provides advertisements, personalised content and recommendation to the user.
By June 30th, 2014, Telstra Ltd held 27% of the shares in Ooyala Inc (Telstar Ltd 2014). The value of the investment was $61 million. But this investment did not meet the criteria of AASB 128: Investments in Associates and Joint Ventures and so the accounting could not be made from equity perspective as an associate. The transaction was shown through mergers and acquisition activities.
3. Financial statement reporting regarding investment in Ooyala, Videoplaza and Nativ:
All these three companies were 100% acquired during the...