What are the key steps involved in financial consolidation after the acquisition of Thomas Ltd by Jonathan Ltd? How can we calculate the acquisition analysis as of 1 July 2020, prepare consolidation journal entries for 30 June 2022, complete a consolidated worksheet, and finally, prepare consolidated financial statements as of 30 June 2022?

Question

Lizeth · Answer

Step 1: Calculate Acquisition Analysis (1 July 2020)

Acquisition consideration: $246,000

Equity acquired: $130,000 (Share capital) + $50,000 (General reserve) + $40,500 (Retained earnings) = $220,500

Net identifiable assets and liabilities:

Plant (Fair value - Carrying amount): $10,000

Land (Fair value - Carrying amount): $20,000

Inventories (Fair value - Carrying amount): $8,000

Unrecorded assets/liabilities:

Brands: $12,000

Contingent liability: $15,000

Goodwill calculation:

Account for unrecorded items and calculate excess of fair value over consideration.

Step 2: Prepare Consolidation Journal Entries (30 June 2022)

Adjust for dividends, intra-group transfers, and fair value changes in assets/liabilities.

Record all necessary adjustments for accurate financial reporting.

Step 3: Complete Consolidated Worksheet (30 June 2022)

Adjust for all transactions, consolidate profits, revenues, liabilities, and equity balances of both firms.

Ensure accuracy in reflecting combined financial performance.

Step 4: Prepare Consolidated Financial Statements (30 June 2022)

Summarize the financial position, performance, and cash flows of Jonathan Ltd and Thomas Ltd post all adjustments.

Provide a comprehensive view of the consolidated entities for stakeholders.

Exploring Financial Consolidation: Jonathan Ltd and Thomas Ltd

Step 1: Calculate Acquisition Analysis (1 July 2020)

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