MyAssignmentServices uses cookies to deliver the best experience possible. Read more

Table of Contents

Answer to Part A..

a)

b)

Answer to Part B..

Introduction.

Discussion.

Conclusion.

Bibliography.

Company Accounting - Answer to Part A

Acquisition Analysis

Net fair value of identifiable assets and liabilities of Blanca Ltd

Particulars

Details

Amount($)

Equity Fund:

   

Equity

135000

 

Retained Earnings

144000

279000

Inventory

14560

 
 

79380

93940

Machine

59500

59500

Cost

 

432440

Calculation of Goodwill/Capital reserve

Cash

198000

 

Equity

45000

 

Total Consideration

 

243000

Less: Cost

(93940+59500)

153440

Goodwill

 

89560

a)

In the Books of Antara Ltd

Date

Particulars

Debit($)

Credit($)

30/06/2020

Accumulated Depreciation of Machine

198000

 
 

To Deferred Tax Liability

 

59400

 

To Business Combination Valuation Reserve

 

59500

 

To Machine

 

79100

30/06/2020

Depreciation Expenses

28333

 
 

Retained Earnings

28333

 
 

To Accumulated Depreciation

 

56666

       
 

Deferred Tax Liability

14850

 
 

To Income Tax Expenses

 

3713

 

To Retained Earnings

 

11138

       
 

Goodwill

89560

 
 

To Business Combination Valuation Reserve

 

89560

       

07-01-2018

Retained Earnings

144000

 
 

Share Capital

135000

 
 

Business Combination Valuation Reserve

243000

 
 

To Shares in Blanca Ltd

 

522000

       

07-01-2019

Retained Earning

306000

 
 

Share Capital

135000

 
 

Business Combination Valuation Reserve

243000

 
 

To Shares in Blanca Ltd

 

684000

       

30/6/2020

Sales Revenue

85000

 
 

To Cost of Sales

 

85000

       

30/06/2020

Sales Revenue

20800

 
 

To Cost of Sales

 

10000

 

To Inventory

 

10800

b)

Particulars

Antara Ltd

Blanca Ltd

Adjustments

Net

Proposed
Consolidated@25%

Antara Ltd
Group

 

(A)

(B)

DR

CR

     
 

$

$

         

Revenue

900000

432000

105800

 

326200

81550

981550

Less: Expenses

(504000)

(144000)

28333

95000

(77333)

(19333)

(495000)

Profit Before Tax

396000

288000

   

536867

134216.75

530217

Income Tax Expenses

(144000)

(90000)

 

3713

(86287)

(21572)

(165572)

Profit After Tax

252000

198000

   

450580

112645

364645

Add: Gains on non-current revaluation

54000

25200

   

25200

6300

60300

Comprehensive Income

306000

223200

134133

98713

1175227

293807

599807

Company Accounting - Answer to Part B

a) Introduction to Company Accounting

The guidelines are provided by IAS which relates to the use of equity process. It recommends the identification of the earnings that depends on the circulation which is not enough for evaluation. Thus, the revenue of the partner’s in a joint venture that we get as circulation is not that essential. It has been seen that irrespective of effect on the partner, it is possible for the participant to get joint ventures as an output for the investment on which the creditors will deliberate for the determination of income or the losses of the investor by making changes in the financial statement (El Ghoul et al., 2020). Thus, Equity Approach includes proper figures relating to the net assets and the profit and loss of the creditors.

Discussion on Company Accounting

Equity Analysis is used to find out the files of organization along with the financial proceedings. Through the various accounts, the investors commitment to equity is studied. Therefore, after the interest held by the firm is around 20-50% as dividends or as some other type of investment, there is a need for consolidated equity method. This is why cost or equity method is preferred for the internal purpose but the acquisition method has to be followed if the holdings are more than 50%. The major difference of Antara’s Ltd is the use of equity method. Accounts are not combined in the statement which is the general consolidation rule. Thus, with an increase in the income of Blanca Ltd., the investment of Antara Ltd also increases. Similarly, a payment made in the form of dividend reduces the investment of the company but there we see no impact when the dividends are paid as subsidiaries (Gordon et al., 2017).

Antara’s Ltd had an associate investment of $198,000 in their financial statement. Along with this, the financial statement will also have the post-acquisition incomes of associates which will come under Antara’s Ltd consolidated worksheet investment side. Thus, the annual report investment column of the firm has goodwill that will have disclosure.

The people who use the information for the creation of possible investment or who keep a check on the legal aspects of the organisation are the external users like investors, customers, suppliers, banks, and tax authorities. The decision of the firm about investment determines the company’s performance. The available information about Antara’s Ltd.’s external users includes: Cash Flow Consolidated Statement; Comprehensive Income Consolidated Statement; Consolidated Income Statement; Consolidated Balance Sheet and Disclosure consisting of records of financial records.

According to the information given above, we see that the information relating to taxable income calculation is important in order to know the true tax amounts by the tax consultants. This helps the government to know if the financial information by the company is legal and true. As per the regulations, the financial information should not disclose the interests of the shareholders for their benefit. The accounting records and financial statements are studied for the audit (Lestari, 2020). The financial information also interests the business analysts, journalists, and others.

Application of the equity method:

The things relating to financial reporting that need to be followed while using the equity method:

When the equity application method is used then the ownership is risked after which the carrying amount alters as well.

The gains and losses relating to income and expenditure of the company is accepted by the client.

To make evident that differences in proportionate interest of investors in investee arise from differences in investee and other sources of income of comprehensive nature, which is impacted due to the revaluation of property and variation in the exchange rate of currency doing of adjustments to the carrying value becomes important. Investor’s share that are related to these changes and variation is primarily recognised in other incomes of comprehensive nature (Nassreddine, 2016). The add on in the investments can be seen by the investors when profits are earned by the investees in case of the use of the equity financing approach because in this the profit of the investor is determined from the investees.

After acquisition, the interests and profits and losses of the firm becomes equal in order to cover the things that need the extra changes in the assets that can be depreciated and also depends on the price purchase.

The creditors need to make alterations in the financial records and the investment’s equity approach when some particular accounting practices is there.

Recommendations made on the disclosures:

The disclosure should clearly mention the associate’s financial information which shows the net assets after the deduction of liabilities and the net revenue earned which also comprises the profit and loss.

The difference in the reporting dates of the associates and the investors must be given individually (Novák, 2016).

The Restrictions that are of different nature must be highlighted.

The details about investment can be skipped.

Reference to Part A

As per IAS 28- Equity Technology, investments are called a strategy of funding in which it is known and the changes in the adjustments which needs to be done after the purchase in the share of the investor of net assets. The profit or loss of the Financier brings about the profit or loss of the company from that person and also the net profit of the financier is the taxable income.

b) The company pays the dividends after the company has paid the taxes and interests from the profit it has earned and keeping the retained earnings aside. Here, dividend is paid by Blanco Ltd to Antara Ltd and other equity holders because it earned profits.

In comparison to the consolidation method, the equity financing does not have elimination. In this the investors also see the change in the investment like when the investee earns profits because the investor gets their profits from the investee. This is also called equity pick up. So, we can say that if there is an increase in the earnings of Blanca Ltd, then a directly proportional impact will be seen in the investments of Antara Ltd. Similarly, when the dividend is paid then the investment of the company will reduce.

The receipt of dividend from Blanco Ltd. will be shown by reducing the investment account and dividend will be recorded by Antara Ltd which will imply a cash outflow from the investee’s account. The journal entry for this will be Debit of investment and Credit of Cash Account (Novák, 2016). When dividend is paid to the associate then the cash Account will be debited and the Investment account will be credited. The dividends that are earned by them increase their income but bring down their investment.

Reference to Part A

IAS 28 that is about the Investment in Associates shows that the investors majorly influence the associates who are the entity. The power of participation in operational and accounting administration is given by them where they follow the equity method of financing for the preparation of the financial statement. It also mentions the scope of the payment of dividends and exempts the distribution of the amount received by the investee that reduces the investment’s carrying value (Novák, 2016). Thus, such investments are called non-current investments, the disclosure of which is required.

Conclusion on Company Accounting

After studying this it has been observed that the problems have come in the information of accounting during the preparation on the basis of equity method shows the investment made by the associates after the deduction of dividends. When the investors receive the dividends, it increases the investors revenue as per the financial statement, except for when this reduces the investment. The disclosures that must be made in the financial statement is also mentioned in the report.

Reference List for Company Accounting

El Ghoul, S., Guedhami, O., Kwok, C. C., & Zheng, Y. (2020). The role of creditor rights on capital structure and product market interactions: International evidence. Journal of International Business Studies, 1-27.

Gordon, E. A., Henry, E., Jorgensen, B. N., & Linthicum, C. L. (2017). Flexibility in cash-flow classification under IFRS: determinants and consequences. Review of Accounting Studies, 22(2), 839-872.

Lestari, A. (2020). The Effect of profitability, investment opportunity set and free cash flow on dividends paid to companies (Empirical Study of Manufacturing Companies). Jurnal Mantik, 3(4, Feb), 597-606.

Nassreddine, G. (2016). Determinants of financial information disclosure: A visualization test by cognitive mapping technique. Journal of Economics, Finance and Administrative Science, 21(40), 8-13.

Novák, M. (2016). The Quality of Disclosure under IAS 38 in Financial Statements of Entities Listed on PSE. European Financial and Accounting Journal, 31-44.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

Get It Done! Today

Applicable Time Zone is AEST [Sydney, NSW] (GMT+11)
Not Specific >5000
  • 1,212,718Orders

  • 4.9/5Rating

  • 5,063Experts

Highlights

  • 21 Step Quality Check
  • 2000+ Ph.D Experts
  • Live Expert Sessions
  • Dedicated App
  • Earn while you Learn with us
  • Confidentiality Agreement
  • Money Back Guarantee
  • Customer Feedback

Just Pay for your Assignment

  • Turnitin Report

    $10.00
  • Proofreading and Editing

    $9.00Per Page
  • Consultation with Expert

    $35.00Per Hour
  • Live Session 1-on-1

    $40.00Per 30 min.
  • Quality Check

    $25.00
  • Total

    Free
  • Let's Start

Get
500 Words Free
on your assignment today

Browse across 1 Million Assignment Samples for Free

Explore MASS
Order Now

Request Callback

My Assignment Services- Whatsapp Tap to ChatGet instant assignment help

Get 500 Words FREE
Ask your Question
Need Assistance on your
existing assignment order?