EAB20803: On 1 January 2020 Q10 Bhd acquired 80% shares in Phyto Bhd for an immediate cash payment of RM6,720,000: Financial Accounting and Reporting 3 Assignment, UniKL, Malaysia
|University||Universiti Kuala Lumpur (UniKL)|
|Subject||EAB20803: Financial Accounting and Reporting 3|
The following are the statements of comprehensive income of Perak Berhad and Silver Sdn Bhd for year ended 31 December 2021:
1. Perak acquired 80% of the preference shares issued by Silver on 1 January 2021 with cash consideration of RM500,000. Silver has in issuance 1,500,000 units of preference shares with the value of RM1,500,000.
2. On 1 July 2021, Perak acquired 60% of the ordinary shares issued by Silver. Total issued ordinary shares is valued at RM12 million. This acquisition resulted in partial goodwill of RM400,000. Partial goodwill was impaired during the current year by RM8,000.
3. On the date of acquisition, building belonging to Silver was found to be RM100,000 higher with estimated useful life of 20 years. However, equipment belonging to Silver was found to have fair value of RM10,000 less than the carrying value. Useful life of the machine is estimated at to be 5 years at this date. None of these fair value adjustments have been recorded. Depreciation must be adjusted by monthly basis.
4. In the post-acquisition period, Perak sold to Silver inventories at the invoice price of RM50,000 at cost plus 25%. 30% of these inventories still remain as part of Silver’s closing inventories.
5. On 1 January 2021, Perak gave a long-term loan to Silver with the amount of RM400,000 This loan has an annual interest of 5%. Both Silver and Perak has accrued the loan interest and recognized the loan interest income for year ended 2021.
6. Revaluation surplus for the current year is in respect of land revaluation surplus. Revaluation opening balance for Silver was recorded to be at RM550,000.
(a) Prepare the Consolidated Statement of Comprehensive Income for the group for year ended 31 December 2021.
(b) Prepare an extract of the Consolidated Statement of Changes in Equity for the group for year ended 31 December 2021.
The following are the statement of financial position for year ending 31 December 2021
1. Faucet acquired 80% of Sink’s ordinary shares on 1 January 2020 when the retained earnings of Sink was RM 1.3 million. On 1 January 2021, Sink acquired 80% of ordinary shares in Shower. All consideration transferred have been recorded.
2. On 1 January 2020, one of Sink’s non-current asset was estimated to have a higher fair value of RM36,000. On 1 January 2020 also, Shower’s plant had a fair value of RM120,000 more than the carrying value. Both assets are estimated to have a useful life of 6 years.
3. Sink sold equipment to Shower during the year with the carrying value of RM40,000 at a profit of RM10,000. Useful life is estimated to be 5 years. Sink sold inventories to Faucet during the year with a profit of RM30,000. 50% of the inventories have been sold.
4. The group uses partial goodwill method and straight-line depreciation method to prepare its accounts. Depreciation is adjusted fully in the year of acquisition and none in the year of disposal.
Prepare the group statement of financial position as at 31 December 2021.
The following are the extract of statement of financial position as at 31 December 2021:
1. On 1 January 2020 Q10 Bhd acquired 80% shares in Phyto Bhd for an immediate cash payment of RM6,720,000 and exchange share of two (2) ordinary shares for every five (5) ordinary shares in Phyto Bhd. The share price of Q10 Bhd at the date of this share exchange was RM2.20 each. Q10 Bhd has recorded the investment in Phyto Bhd. Phyto’s retained profit at the date of acquisition was RM4,000,000.
2. On 1 January 2021, Q10 Bhd also acquired 30% (3.6million units) ordinary shares in Berry Bhd for cash consideration of RM7,800,000. The retained profit of Berry Bhd on the acquisition date was RM1,950,000.
3. On the date of acquisition, Q10 Bhd agreed to revalue the following assets of Phyto Bhd:-
The remaining useful life of plant on 1 January 2021 was 10 years and depreciation is calculated based on straight line basis.
4. During the year, half of Berry Bhd’s inventories were goods purchased from Q10 Bhd which were invoiced at profit of 15% on selling price. RM1,000,000 of these goods still remained in the closing inventories of Berry Bhd.
5. In the Q10 Bhd account receivables with the amount RM110,000 was due from Phyto Bhd. It includes RM24,000 for inventories sent by the Q10 Bhd on 26 December 2021 but received by Phyto Bhd on 3 January 2022.
6. Q10 Bhd agree to assist Phyto Bhd by RM471,000 and this amount recorded at bills payable Bhd and Q10 Bhd has discounted RM31,700 of these bills.
7. Goodwill will be calculated by fair value of net assets and Phyto’s goodwill was impaired by 15% in the current year.
Prepare the group’s statement of financial position as at 31 December 2021.
Note: Show all the relevant workings.
The following are the financial statements for Dragon and Jenny the year ended 31 March 2022:
1. Dragon Sdn Bhd acquired 75% (2.1 million units) of the ordinary shares issued by Jenny Sdn Bhd on 1 April 2021 with ordinary share exchange of 1 share for every 3 shares acquired in Jenny. Fair value of Dragon’s shares is estimated at RM3.80 on this date.
Jenny’s ordinary shares had a fair value of RM1.50 on the acquisition date. Dragon also issued RM200,000 loan stock with an annual interest of 8% as part of the consideration transferred This investment is not yet recorded.
2. On acquisition date, plant belonging to Jenny was estimated to be RM60,000 higher than the carrying value with an estimated useful life of 5 years.
3. Building belonging to Dragon and Jenny were found to have increased in fair value of RM300,000 and RM60,000 respectively by 31 March 2022.
4. During the year, Jenny sold inventories to Dragon at cost plus 25%. Invoice value is RM150,000. Dragon has not sold 40% of these inventories. Dragon has remitted a payment of RM50,000 from this transaction on 31st March 2022 which was only received on 2nd April 2022.
5. During the year, Dragon sold machinery to Jenny with profit of RM30,000. Useful life of this plant is 5 years. Depreciation adjustment from this intercompany is adjusted in the year of acquisition and none in the year disposal.
6. Debenture interest expenses have been fully recorded. Dragon acquired 50% of the debentures issued by Jenny on 1 April 2021 but have yet to recognize its share of dividends from Jenny as income. This investment is fully recorded.
7. In March 2022, both Dragon and Jenny declared full year preference shares dividends which has not yet been recorded.
8. Full goodwill was impaired by 50% by 31st March 2022.
Prepare the Consolidated Statement of Financial Position for Dragon group as at 31 March 2022.
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