(25 MARKS) QUESTION 4 On 1 January 2016, Ben acquired 90 % of the equity share capital of Mun in a share exchange in which Ben issued two new shares for every three shares it acquired in Mun. Additionally, on 31 December 2016, Ben will pay the sharcholders of Mun RMI.76 per share acquired. Ben's cost of capital is 10% per annum. At the date of acquisition, shares in Ben and Mun had a share market value of RM6.50 and RM2.50 each respectively. Statement of Profit of Loss for the year ended 30 September 2016 Ben RM'000 64,600 (51,200) 13,400 (1,600) (3,800) (420) 7,580 (2,800) 4,780 Mun RM'000 38,000 (26,000) 12,000 (1,800) (2,400) Revenue Cost of sales Gross profit Distribution cost Administrative expenses Finance costs Profit before tax Income tax expenses Profit for the year 7,800 (1,600) 6,200 Equity as at 1 October 2015 Equity shares of RM1 each Retained earnings 30,000 54,000 10,000 35,000 The following information is relevant: 1. At the date of acquisition, the fair values of Mun's assets were equal to their carrying amounts except for these two items: (i) An item plant had a fair value of RM1.8 million above its carrying amount. The remaining life of the plant at the date of acquisition was three years. Depreciation is charged to costs of sales. (i)Mun had a contingent liability which Ben estimated to have value of RM450,000. This has not changed as at 30 September 2016 2. Ben's policy is to value the non-controlling interest at fair values at the date of acquisition. For this purpose, Mun's share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. 3. Sales from Ben throughout the year ended 30 September 2016 had consistently been RM800,000 per month. Ben made a mark-up on cost of 25% on these sales. Mun had RM1.5 million of these goods in inventory as at 30 September 2016 Although Mun has been profitable since its acquisition by Ben's product. The market for Mun has been badly hit in recent months and the goodwill has been impaired by RM2 million as at 30 September 2016. 4 Required: Calculate the consolidated goodwill at the date of acquisition of Mun. a) (5 marks) b) Prepare the consolidated statement of profit or loss for Ben for the year ended 30 September 2016. Relevant workings are to be disclosed. (20 marks) (25 MARKS) QUESTION 4 On 1 January 2016, Ben acquired 90 % of the equity share capital of Mun in a share exchange in which Ben issued two new shares for every three shares it acquired in Mun. Additionally, on 31 December 2016, Ben will pay the sharcholders of Mun RMI.76 per share acquired. Ben's cost of capital is 10% per annum. At the date of acquisition, shares in Ben and Mun had a share market value of RM6.50 and RM2.50 each respectively. Statement of Profit of Loss for the year ended 30 September 2016 Ben RM'000 64,600 (51,200) 13,400 (1,600) (3,800) (420) 7,580 (2,800) 4,780 Mun RM'000 38,000 (26,000) 12,000 (1,800) (2,400) Revenue Cost of sales Gross profit Distribution cost Administrative expenses Finance costs Profit before tax Income tax expenses Profit for the year 7,800 (1,600) 6,200 Equity as at 1 October 2015 Equity shares of RM1 each Retained earnings 30,000 54,000 10,000 35,000 The following information is relevant: 1. At the date of acquisition, the fair values of Mun's assets were equal to their carrying amounts except for these two items: (i) An item plant had a fair value of RM1.8 million above its carrying amount. The remaining life of the plant at the date of acquisition was three years. Depreciation is charged to costs of sales. (i)Mun had a contingent liability which Ben estimated to have value of RM450,000. This has not changed as at 30 September 2016 2. Ben's policy is to value the non-controlling interest at fair values at the date of acquisition. For this purpose, Mun's share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. 3. Sales from Ben throughout the year ended 30 September 2016 had consistently been RM800,000 per month. Ben made a mark-up on cost of 25% on these sales. Mun had RM1.5 million of these goods in inventory as at 30 September 2016 Although Mun has been profitable since its acquisition by Ben's product. The market for Mun has been badly hit in recent months and the goodwill has been impaired by RM2 million as at 30 September 2016. 4 Required: Calculate the consolidated goodwill at the date of acquisition of Mun. a) (5 marks) b) Prepare the consolidated statement of profit or loss for Ben for the year ended 30 September 2016. Relevant workings are to be disclosed. (20 marks)
