ACT305 - Corporate Accounting - Accounting & Finance Assignment Help

Assignment Task

Q1. Your client is very keen to expand her business and has heard that there is an accounting standard that deals with business combinations but is uncertain what a business combination is and how it can be measured for accounting purposes.
Write a letter to your client explaining what a business combination is and what it is not, giving examples, with references to the Accounting Standard, in a non-technical way that your client can understand, as she is not familiar with accounting terminology. She will need to know what constitutes a business combination, how and when it is judged to have taken place.
She has heard that the values that are placed on the parts that make up the combination when viewed from the seller and the acquirer’s perspective can be different and finds that confusing as she thought that they would be the same. Explain how and why this can occur.

Q2. Parent Company and Subsidiary Company are part of the same group and prepare their own sets of financial statements each year. During the year Subsidiary Company recorded sales of inventory to Parent Company at cost plus 15% and at the year-end some of that inventory was still recorded in Parent Company’s books.
Subsidiary Company had expanded its business during the year and had purchased plant and machinery from Parent Company to enable the expansion to take place. Parent Company made a $20,000 profit on the transfer. Both companies apply a depreciation rate of 20%.
To assist with the expansion Subsidiary Company rented factory space from Parent Company and also paid Parent Company for management services provided during the year. When Parent Company prepares consolidated financial statements explain the adjustments that will be needed to deal with the intragroup transactions. Where appropriate identify how the nature of the transaction requires a different treatment from the other intragroup transactions. How is the current and deferred taxation affected? 

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