B407F Week 3 (student)-2

B407F Week 3 (student)-2 - B407F Week 3 -Consolidated...

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B407F Week 3 -Consolidated Financial Statements (1) Illustration 1 Acquisition method (Cash) Statement of Financial Position before acquisition: Company A Company B $m $m $m $m Tangible non-current assets 600 180 Current assets Cash 1,000 20 Accounts Receivable 300 400 Inventories 200 1,500 100 520 Total assets 2,100 700 Share Capital ($1 each) 1,000 400 Retained earnings - - Total equity 1,000 400 Current liabilities Accounts payable 800 300 Accruals 300 1,100 - 300 Total equity and liabilities 2,100 700 1. Company A acquired all the shares in Company B for $400m cash. In Company A’s book, journal entries: Debit($m) Credit($m) Statement of Financial Position of Company A and B after acquisition: Company A Company B $m $m $m $m Tangible non-current assets 600 180 Investment in Company B 400 Current assets Cash (1,000-400) 600 20 Accounts Receivable 300 400 Inventories 200 1,100 100 520 Total assets 2,100 700 Share Capital ($1 each) 1,000 400 Retained earnings - - Total equity 1,000 400 All rights reserved by W.F.Hui. No further copying is permitted. 1
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Current liabilities Accounts payable 800 300 Accruals 300 1,100 - 300 Total equity and liabilities 2,100 700 Consolidation journal entries: Debit($m) Credit($m) Consolidation worksheet Company A and its subsidiary Consolidated Statement of Financial Position as at ---- All rights reserved by W.F.Hui. No further copying is permitted. Company A Company B Debit working Credit Consolidation $m $m $m $m Tangible non-current assets 600 180 780 Investment in Company B 400 W1 - Current assets Cash 600 20 620 Accounts Receivable 300 400 700 Inventories 200 100 300 Total assets 2,100 700 2,400 Share Capital ($1 each) 1,000 400 W1 1,000 Retained earnings - - - Total equity 1,000 400 1,000 Current liabilities Accounts payable 800 300 1,100 Accruals 300 - 300 Total equity and liabilities 2,100 700 400 400 2,400 2
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All rights reserved by W.F.Hui. No further copying is permitted. $m Tangible non-current assets 780 Current assets - Cash 620 Accounts Receivable 700 Inventories 300 Total assets 2,400 Share Capital ($1 each) 1,000 Retained earnings - Total equity 1,000 Current liabilities Accounts payable 1,100 Accruals 300 Total equity and liabilities 2,400 3
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Illustration 2 Goodwill (purchase by share and cash) Company A acquired all the shares in B by an exchange of one share in Company A for every one share in Company B, plus $1.5 per acquired Company B share in cash. The market price of each Company A share at the date of acquisition was $2.5, and the market price of each Company B share at the date of acquisition was $1.5. Goodwill at acquisition: $m In Company A’s book, journal entries: Debit($m) Credit($m) Investment in Company B Share Capital Share Premium Cash Consolidation journal entries: Debit($m) Credit($) Company B – Share Capital Goodwill Company A – Investment in Co. B (W1-Elimination of investment in subsidiary) All rights reserved by W.F.Hui. No further copying is permitted.
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This note was uploaded on 02/24/2012 for the course ACT 407 taught by Professor Mshui during the Fall '11 term at The Open University.

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B407F Week 3 (student)-2 - B407F Week 3 -Consolidated...

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