Acquisition Analysis and BCVR Entries - Accounting and Finance Assignment Help

Assignment Task

Question 

On 1 July 2017, Adam Ltd acquired all of the shares of Beyer Ltd, on a cum-div. basis, for $2,700,000. At this date, the equity and liability sections of Beyer Ltd’s statement of financial position showed the following balances:

During the period 1 July 2017 to 30 June 2019, the following intragroup transactions have occurred between Adam Ltd and Beyer Ltd:

(T1) On 30 June 2019, Adam Ltd approved and declared a final dividend of $12,000, and Beyer Ltd approved and declared a final dividend of $18,000.

(T2) On 1 January 2018, Adam Ltd provided a $500,000 loan to Beyer Ltd. The interest rate on this loan is 10% p.a,, and interest is paid each year on 30 June. On 30 June 2019, no principal repayments have been made on the loan.

(T3) In April 2018, Adam Ltd sold inventory to Beyer Ltd for $24,000. The inventory had previously cost Adam Ltd $18,000. By 30 June 2018, three-quarters of this inventory had been sold to Scarf Ltd for $22,000. The remainder of the inventory was sold to Fluffy Jacket Ltd in August 2018 for $7,500.

(T4) On 3 June 2019, Beyer Ltd sold inventory to Adam Ltd for $42,000. The transfer price included a mark-up of 20% on cost. On 30 June 2019, one-half of this inventory was still on hand.

(T5) In November 2017, Beyer Ltd sold inventory to Adam Ltd at a transfer price of $45,000. The inventory had previously cost Beyer Ltd $31,000. All of this inventory was subsequently sold to Boots Ltd in June 2019 for $52,500.

Required:

a. Show the acquisition analysis on 1 July 2017, i.e. Step 1 of the consolidation process.

b. Prepare the BCVR entries on 30 June 2019, i.e., Step 2 of the consolidation process.

c. Prepare the pre-acquisition entries on 30 June 2019, i.e., Step 3 of the consolidation process.

d. Prepare the intragroup transaction adjustment entries on 30 June 2019, i.e., Step 4 of the consolidation process.

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