On 1 July x2, H plc acquired 80% of the ordinary share capital of S plc at a cost of RM10,280,000. On the same date, it also acquired 50% of Ss 10% loan notes at par. The summarized draft financial statements of both companies are as follows: Statement of Profit or Loss for the year to 31 march x3 H plc Revenue Cost of sales Gross profit Operating expenses Loan interest received/(paid) Operating profit Tax PAT RM000 60,000 -42,000 18,000 -6,000 75 12,075 -3,000 2,075 S plc RM000 24,000 -20,000 4,000 -200 -200 3,600 -600 3,000 Statement of Financial Position as at 31 March x3 Non-current assets Investments Current assets Hill RM'000 19,320 11,280 15,000 45,600 Skip RM000 8,000 NIL 8,000 16,000 10,000 10 million ordinary shares 2 million ordinary shares Retained profit b/f Profit for the year Non current liabilities - 10% loan notes Current liabilities 16,525 9,075 NIL 10,000 45,600 2,000 5,400 3,000 2,000 3,600 16,000 The following information is relevant: a. The fair value of S plc's assets were equal to their carrying amount with the exception of its plant, which had a fair value of RM3.2 million in excess of its carrying amount at the date of acquisition. The remaining life of S plcs plant at the date of its acquisition was 4 years and this period has not changed as a result of the acquisition. Depreciation of the plant is on a straight line basis and charged to cost of sales. S plc has not adjusted the value of its plant as a result of the fair value exercise. b. In the post-acquisition period, H plc sold goods to S plc at a price of RM6 million. These goods had cost H plc RM4.5 million. During the year, S plc had sold RM5 million (at cost to S ple) of these goods for RM7.5 million. c. H plc bears almost all of the administrative cost incurred on behalf of the group (invoiving, credit control, etc.). It does not charge S plc for this services as to do so would not have a material effect on the group's profit. d. Revenues and profits should be deemed to accrue evenly throughout the year. e. The current account of the two companies were reconciled and S plc owed H plc RM750,000. Required: (i) Prepare the consolidated profit or loss statement for the year 31 March x3. (17 marks) Calculate the goodwill value at the date of acquisition using Method 2. (8 marks) On 1 July x2, H plc acquired 80% of the ordinary share capital of S plc at a cost of RM10,280,000. On the same date, it also acquired 50% of Ss 10% loan notes at par. The summarized draft financial statements of both companies are as follows: Statement of Profit or Loss for the year to 31 march x3 H plc Revenue Cost of sales Gross profit Operating expenses Loan interest received/(paid) Operating profit Tax PAT RM000 60,000 -42,000 18,000 -6,000 75 12,075 -3,000 2,075 S plc RM000 24,000 -20,000 4,000 -200 -200 3,600 -600 3,000 Statement of Financial Position as at 31 March x3 Non-current assets Investments Current assets Hill RM'000 19,320 11,280 15,000 45,600 Skip RM000 8,000 NIL 8,000 16,000 10,000 10 million ordinary shares 2 million ordinary shares Retained profit b/f Profit for the year Non current liabilities - 10% loan notes Current liabilities 16,525 9,075 NIL 10,000 45,600 2,000 5,400 3,000 2,000 3,600 16,000 The following information is relevant: a. The fair value of S plc's assets were equal to their carrying amount with the exception of its plant, which had a fair value of RM3.2 million in excess of its carrying amount at the date of acquisition. The remaining life of S plcs plant at the date of its acquisition was 4 years and this period has not changed as a result of the acquisition. Depreciation of the plant is on a straight line basis and charged to cost of sales. S plc has not adjusted the value of its plant as a result of the fair value exercise. b. In the post-acquisition period, H plc sold goods to S plc at a price of RM6 million. These goods had cost H plc RM4.5 million. During the year, S plc had sold RM5 million (at cost to S ple) of these goods for RM7.5 million. c. H plc bears almost all of the administrative cost incurred on behalf of the group (invoiving, credit control, etc.). It does not charge S plc for this services as to do so would not have a material effect on the group's profit. d. Revenues and profits should be deemed to accrue evenly throughout the year. e. The current account of the two companies were reconciled and S plc owed H plc RM750,000. Required: (i) Prepare the consolidated profit or loss statement for the year 31 March x3. (17 marks) Calculate the goodwill value at the date of acquisition using Method 2. (8 marks)
