1.

Chapter: Business Combination & Consolidated Balance Sheet Investment in subsidiary by parentsIn the books of parent company a) Recording investment in subsidiary by creating new company Dr. Investment in S Accumulated Depreciation r. Assets !Subsidiary" #i$ed % urrent at cost) b) Recording transfer of assets to subsidiary by parents for creating new company Dr. Assets !Subsidiary" #i$ed % urrent at cost) r. Accumulated Depreciation ommon stock at par Additional paid in capital !Differential figure) c) Investment in subsidiary and recording subsidiary&s assets in parent balance sheet if parent issue stock Dr. Investment in S r. ommon stock !at par) Additional paid in capital !'$cess of consideration above par) Retained 'arnings or Reserve( if any Deferred merger costs Deferred Stock issue costs d) Investment in subsidiary and recording subsidiary&s assets in parent balance sheet if parent issue paid cash Dr. Investment in S r. )ank !or ash) e) *arent e$penses statutory in regards to merger Dr. Deferred merger costs !or Deferred stock issue costs r. )ank !or ash) f) Recording *urchase of subsidiary&s assets by parents Dr. Assets !Subsidiary" #i$ed % urrent) +oodwill !Differences between purchase consideration % fare value of assets) r. Share capital !subsidiary&s capital) Share premium !subsidiary&s premium) Retained 'arnings !subsidiary&s) Revaluation Reserve !subsidiary&s) urrent ,iabilities !#air value of subsidiary&s current liabilities) Deferred -erger costs Deferred Stock issue costs g) Dividend received in cash Dr. )ank !or ash) r. Dividend Income !or Investment Income-*rofit % ,oss) g) Dividend receivable since subsidiary has declared dividend Dr. Dividend Receivable r. Dividend Income !or Investment Income-*rofit % ,oss) In the books of parent company a) -arket value of share price will taken as considerations and e$cess above the par value will be considered as share premium. in case of reverse ac/uisition !issue of stock by parents) b) Record transfer of subsidiary&s assets to parent Dr. Investment in *arents urrent ,iabilities !at book value) Accumulated Depreciation r. Assets !Subsidiary" #i$ed % urrent at book value) +ain on sale of net assets c) Recording distribution parent&s share Dr. Share capital !subsidiary) Share premium !subsidiary) Retained 'arnings !subsidiary)

+ain on sale of net assets r. Investment in *arents Calculation of Goodwill E uity at ac uisition date! Share apital Additional paid in capital Retained 'arnings +eneral Reserve Revaluation Reserve !#0-)0 of assets) 1otal '/uity !Assets #air 0alue) Ac/uired 23 *urchase consideration Goodwill Calculation of Group profit E uity at post!ac uisition date! Retained 'arnings- *arent 1otal Retained 'arnings at *ost Ac/uisition )alance sheet ,ess *re-ac/uisition retained earnings *ost Ac/uisition *rofit Ac/uired 23 Group #rofit $$$ $$$ $$$ $$$ $$$ """ $$$ $$$ $$$ $$$ $$$ $$$ $$$ $$$ """

Calculation of $on!Controllin% Interest Share apital $$$ Reserve % Surplus $$$ 1otal Retained 'arnings at *ost Ac/uisition )alance sheet $$$ 1otal '/uity $$$ $on!Controllin% Interest!1otal '/uity 4 5ot-ac/uired 23) """ &reatment of dividend 6hen the dividend declared or paid from pre-ac/uisition profit then the following ad7ustments need to do" a. Reduce the profit reserve or Retained earnings b. Reduce the Investment in subsidiary or *urchase considerations 6ith the amount of dividend declared or paid from pre-ac/uisition profit.