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Accounting Question

The document outlines the acquisition analysis of Rowley Ltd as of July 1, 2022, detailing its equity, fair value adjustments, and resulting goodwill from the acquisition. It also includes consolidation worksheet entries as of June 30, 2025, reflecting initial entries, adjustments for plant, land, inventory, brands, contingent liabilities, and dividend payable. Finally, it presents a consolidated financial statements worksheet summarizing revenues, expenses, profit before tax, and retained earnings for both Yaralla Ltd and Rowley Ltd.

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24 views

Accounting Question

The document outlines the acquisition analysis of Rowley Ltd as of July 1, 2022, detailing its equity, fair value adjustments, and resulting goodwill from the acquisition. It also includes consolidation worksheet entries as of June 30, 2025, reflecting initial entries, adjustments for plant, land, inventory, brands, contingent liabilities, and dividend payable. Finally, it presents a consolidated financial statements worksheet summarizing revenues, expenses, profit before tax, and retained earnings for both Yaralla Ltd and Rowley Ltd.

Uploaded by

viodaofficial
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting question:

1. Acquisition Analysis at 1 July 2022


 Rowley Ltd's Equity:
o Share Capital: $200,000

o General Reserve: $48,000

o Retained Earnings: $82,000 (105,000+15,000-53,000)

o Total Equity: $330,000

 Adjustments to Fair Value:


o Plant: Fair value $320,000, Book value $280,000. Increase $40,000.

o Land: Fair value $240,000, Book value $200,000. Increase $40,000.

o Inventory: Fair value $60,000, Book value $50,000. Increase


$10,000.
o Brands: Fair value $12,000.

o Contingent Liability: Fair value $10,000.

o Dividend Payable: $10,000

 Adjusted Net Assets:


o Equity: $330,000

o Plant Increase: $40,000

o Land Increase: $40,000

o Inventory Increase: $10,000

o Brands: $12,000

o Contingent Liability: $(10,000)

o Total Adjusted Net Assets: $422,000

 Goodwill:
o Acquisition Cost: $330,000

o Fair Value of Net Assets: $422,000

o Goodwill: $330,000 - $422,000 = $(92,000) Bargain Purchase.

2. Consolidation Worksheet Entries at 30 June 2025


 Initial Entries (1 July 2022):
o DR Share Capital $200,000

o DR General Reserve $48,000


o DR Retained Earnings $82,000

o DR Bargain Purchase 92,000

o CR Investment in Rowley Ltd $330,000

 Adjustments:
o Plant:

 Increase in fair value $40,000.


 Depreciation per year $40,000 / 5 years = $8,000.
 Depreciation from 1 July 2022 to 30 June 2025: $8,000 * 3
years = $24,000.
 Plant remaining fair value adjustment = $40,000-24,000 =
$16,000.
 Plant sold 1/1/2025 for 187,000.
 Plant book value 30/6/2025 = 320,000-40,000-24,000 =
256,000.
 Plant book value 1/1/2025 = 256,000-4,000 = 252,000.
 Gain on sale = 187,000-252,000 = -65,000
 Gain on sale reported 4,000, this means an adjustment of -
69,000.
o Land:

 Increase in fair value $40,000.


 Land sold in Feb 2023 for $250,000.
 Gain on land sale = 250,000 - 240,000 = 10,000.
 No further adjustment needed.
o Inventory:

 Increase in fair value $10,000.


 90% sold by 30 June 2023 ($9,000 impact), 10% sold by 30
June 2024 ($1,000 impact).
 All inventory is now sold, so no more adjustment.
o Brands:

 Indefinite life, no amortization.


 No adjustment needed.
o Contingent Liability:

 $10,000 initially.
 $2,500 paid in Aug 2024.
 Remaining liability = 0.
 Adjusted liability.
o Dividend Payable:

 Paid in Sept 2022. No further adjustment.


 Worksheet Entries:
o DR Retained Earnings (1/7/2022) $82,000

o DR General Reserve $48,000

o DR Share Capital $200,000

o DR Bargain Purchase $92,000

o CR Investment in Rowley Ltd $330,000

o DR Retained Earnings (1/7/2024) 69,000 (Adjust gain on sale of


plant)
o DR Retained Earnings (1/7/2024) 7500(Adjust Contingent liability)

o CR Gain on sale of non current assets 69,000

o CR Provision 7500

3. Consolidated Financial Statements Worksheet


Here's the consolidated worksheet.

Yaralla Rowley Adjustme Consolidat


Item
Ltd Ltd nts ed

Revenues $190,000 $110,000 $300,000

Expenses (80,000) (76,000) (156,000)

Gain on Sale of NCA $5,000 $4,000 (69,000) (60,000)

Profit Before Tax $115,000 $38,000 (69,000) $84,000

Income Tax Expense (40,000) (6,000) $20,700 (25,300)

Profit for the Year $75,000 $32,000 (48,300) $58,700

OCI - Revaluation
$12,000 $0 $12,000
Gain

Comprehensive
$87,000 $32,000 (48,300) $70,700
Income

Retained Earnings
$80,000 $88,000 (151,000) $17,000
(1/7/24)

Dividends Paid (34,000) $0 (34,000)


Transfer to Gen. Res. $0 (15,000) (15,000)

Retained Earnings
$121,000 $105,000 (199,300) $26,700
(30/6/25)

Share Capital $280,000 $200,000 (200,000) $280,000

General Reserve $20,

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