BUSN2015 Company Accounting Essay Provides Valuable Insights Into Financial Reporting.

Inventory A/c      Dr         30 000

Business combination valuation reserve A/c          Cr                              $9 000

Deferred tax liability A/c              Cr                          $21 0000

*Accumulated depreciation – equipment A/c        Dr     $530 000

Business combination valuation reserve A/c          Cr                          $280 000

Equipment A/c                                                       Cr                          $130 000

Deferred tax liability A/c                                       Cr                          $120 000

Trademark A/c                                                       Dr  $2 100 000

Business combination valuation reserve A/c          Cr                       $1 470 000

Deferred tax liability A/c                                       Cr                          $630 000

Business combination valuation reserve A/c          Dr     $560 000

Deferred tax liability A/c                                       Dr     $240 000

Payment to be made to employees                       Cr                          $800 000

 Business combination valuation reserve A/c          Dr     $385 000

Deferred tax liability A/c                                       Dr     $165 000

Payment to be made to employees                       Cr                          $550 000

Goodwill A/c                                                         Dr     $815 000

Business combination valuation reserve A/c          Cr                           $815000

Retained earnings A/c (1/7/16)                              Dr  $6 359 000

Share capital A/c                                                    Dr $10 000 000

Shares in Blue Ply Ltd A/c                                     Cr     $16 359 000

Cost of sales                                                       Dr       $30 000

Income tax                                                          Cr                                 $9 000

Transfer from business combination

 Valuation reserve                                                Cr                               $21 000           

Accumulated depreciation – equipment A/c          Dr     $530 000

Business combination valuation reserve A/c          Cr                          $280 000

Equipment A/c                                                       Cr                          $130 000

Deferred tax liability A/c                                       Cr                          $120 000

Depreciation expense                                         Dr     $315 000

Accumulated depreciation                                  Cr        $315 000     

Deferred tax liability                                           Dr       $94 500

 Income tax expense                                            Cr          $94 500   

Table 1: Acquisition analysis

Book value of all the shares at the date of acquisition

= Issued capital + Retained earnings (Bull, 2014)

= $1200000+ $1400000

= $2600000

Amount paid by EF Ltd

= $3000000

The difference between book value and the actual amount paid, i.e. $400000 ($3000000-2600000) will be recorded as payment relating to goodwill of GH Ltd.

Consolidation adjustments will be required to be done in respect of GH Ltd’s plant and equipment in case the consolidated financial statements are prepared for the year ended 30 September 20X0, as Plant, property and equipment are required to be recorded at replacement cost (Amel-Zadeh, Meeks & Meeks, 2016); the adjustment in value of PPE will be made to ascertain the appropriate amount of goodwill.

Books and Journal

Amel-Zadeh, A., Meeks, G., & Meeks, J. G. (2016). Historical perspectives on accounting for M&A. Accounting and Business Research, 46(5), 501-524.

Bull, R. J. (2014). Accounting in business. Butterworth-Heinemann.

Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.