Assignment: Corporate Accounting
Question I
Bright Ltd made an offer to the public for investors to subscribe for 500,000 shares. The shares were issued at $15.00 per share. Applications for shares closed on 8September 20X1, with $5.00 being paid on application and a further $10.00 being payable within one month of allotment.
By 8 September 20X1 applications had been received for 600,000 shares, and it is decided that all subscribers will receive shares on a pro rata basis, with any excess paid on application to be offset against the amount due on allotment. The shares were allotted on 22September 20X1.
Task:
• Provide the journal entries to account for the above events.
• What forms of preferential treatment can the holders of preference shares receive over and above the rights of holders of ordinary shares?
Question II
Victor Ltd owns two blocks of commercial land acquired in 20X1 for the purposes of future development. Block M cost $400,000 and Block N cost $300,000.
Valuations of the blocks are undertaken by an independent valuer on 30 June 20X3 and 30 June 20X5. The assessed values are:
20X3 valuation 20X5 valuation
Block M $430,000 $455,000
Block N $272,000 $329,000
Task:
• Assuming asset revaluations were undertaken for the land in both 20X3 and 20X5, provide the journal entries for both years.
• If a reporting entity elects to use either cost or fair value as the basis for measuring its property, plant and equipment, can it elect to switch to the other method at a later time?
Question III
Charles Limited acquired Carlos Limited on 1 July 20X8 for cash of $3,800,000. At that date, Carlos Limited's net identifiable assets had a fair value of $3,000,000. The fair value of the net identifiable assets of Carlos Limited are determined as follows:
Inventory $500,000
Plant and Equipment $1,000,000
Land $2,000,000
$3,500,000
Less: Bank Loan $500,000
Net Assets $3,000,000
At the end of the reporting period of 30 June 20X9, the management of Charles Limited determines that the recoverable amount of the cash-generating unit, which is considered to be Carlos Limited, totals $2,300,000. The carrying amount of the net identifiable assets of Carlos Limited, which excludes goodwill, has not changed since acquisition and is $3,000,000.
Task:
• Prepare the journal entry to account for any impairment of goodwill.
• What are possible arguments for and against the prohibition of recognition of internally generated goodwill?
Question IV
On 1 July 20X6, Parent Ltd acquired 70 per cent of the share capital of Subsidiary Ltd for $400,000, which represented the fair value of the consideration paid, when the share capital and reserves of Subsidiary Ltd were:
Share capital $350,000
Revaluation surplus $100,000
Retained earnings $50,000
$500,000
All assets of Subsidiary Ltd were recorded at fair value at acquisition date.
Task:
• Prepare the consolidation elimination and adjustment entries to recognise the pre-acquisition capital and reserves of Subsidiary Ltd, assuming that the non-controlling interest was measured at the proportionate share of the acquiree's identifiable net assets (partial goodwill method).
• Where only a proportion of a subsidiary's shares are owned by a parent entity, what proportion of the intragroup transactions between the parent entity and the subsidiary will need to be eliminated on consolidation?
Format your assignment according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the assignment, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.