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ACCT6005 Company Accounting Case Study Sample

Context:

- Assessment coverage: Module 1 Fair Value adjustment and Module 2 Intra group transactions.

- Part A: This assignment is designed to assess your understanding and application of knowledge using a practical case study to analyse and prepare relevant worksheet entries and financial statements for a Group.

- Part B: You will be required to prepare a short video (8 minutes +/-10%) addressing specific questions in this assignment. You will recommend and communicate strategic recommendations regarding various types of consolidation adjustment entries. This is designed to access your understanding of the concepts covered in Module 1 and Module 2 and assess your communication skills to your audience.

Please ensure that your presentation includes reference to relevant Australian Accounting Standards (AASB).

Solution

Question 1:

The accounting for the acquisition is made as per the AASB three-paragraph 5, which hopes in the process of calculating the process of purchase which includes the identification of the one who will acquire. Determination of the date of acquisition along with the measurement of the identifiable as it's acquired in the acquisition process and the debts and any non-controlling interest in the acquiree. Furthermore, recognition and measurement of the goodwill or profit from bargain purchase needs to be done. For Assignment Help Therefore for the equation analysis, we need four different aspects to be covered. Is that the purchase consideration is being paid to the Acquiree, recognizing the identifiable assets and liabilities purchased and calculation of goodwill. In the calculation of purchase consideration, all the payments made with her in the way of cash or equity or both should be included. Whereas for the measurement of the value of net identifiable assets, the assets fair value and its book value should be considered. However, if there is a difference between the book value and the fair value of any asset and the purchasing companies recording the assets at its fair value difference of the fair value and book value includes a tax treatment, which should be adjusted either as DTA or DTL. Further, the gain or loss arising in adjustment after the tax effect will be adjusted with BCVR. If the purchase consideration is higher than the net value of the asset acquired, then the goodwill will be recognized for the difference amount; on the contrary, again on bargain purchase will be recorded.

Question 2:

In the given case scenario, the inventory’s book value is $30,000, whereas its fair value is $40,000; this signifies that the inventory’s fair value and the book value are not the same; therefore, it should be adjusted. In this case, the fair value of the inventory is higher than the book fellow; therefore, again on acquisition should be recognized (Ayres, Huang & Myring, 2017). the gain on acquiring the inventory amounts to $10000 ($40000 -$30000). However, the entire amount will not be recognized again due to the tax rate of 30%. Here the tax liability for the fair value accounting will be $3000, and the BCVR adjustment will be $7000.

Question 3:

In the given case, as Joel is acquiring 100 persons takes in Billy. Therefore any liability relating to the dividend payable is required to be eliminated due to double accounting. Does in the calculation of purchase Thus in the calculation of Purchase Consideration dividend payable by Billy is ignored.

Question 4:

In the consolidation process, as there is 100% acquisition and no non-controlling interest, therefore the entire income, expenditure, assets, and liabilities of the parent company and the subsidiary company will be adjusted. Therefore in the consolidation process, all the income of Billy is acquired to be added with the income of Joel. However, there are some intergroup transactions such as the sale of plant and machinery inventory in between the party we just having a profit or loss aspect. Therefore it should be eliminated for double accounting. For the elimination of the value of inventory or any asset sold by the parent to subsidiary or subsidiary to parent, only the profit part should be eliminated. However, if the Product is sold to external parties, then the profit should not be illuminated (Leo et al., 2018).

Question 5:

In the case of consolidation entries, the difference between the book value and the fair value after exiting the taxes is transferred to the DC fear so that the loss or gain on the fair value acquisition is determinable. In the end, any adjustment relating to the acquisition process is adjusted with this account, at the closing of the acquisition process, the BCVR transfer or to the financial statement or reserves. The making of BCVR adjustment it's to make a detailed statement about the profit and loss arising in the consolidation process.

Question 6:

The given scenario presents that Joel has given a loan to Billy limited for $326,000. However, in the consolidation accounting process, order preparation of consolidated financial statement any intragroup transactions between the parent and the subsidiary is required to be eliminated. Therefore the adjustment for the loan provided by the parent for the subsidiary should be deducted from its asset section. Similarly, the liability of the loan should be eliminated from the books of Billy limited. Along with that, any interest expense or income is it recognized by any parties relating to the loan provided by the parent should be eliminated from the books. Therefore, in the adjustment, the interest received by Joel from Billy and the loan liability is eliminated, and the same treatment is made in the books of Billy for eliminating the unrealized gain or losses (Cîrstea, Nistor & Tiron Tudor,2017).

Reference:

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