P-ASR-001 | Rev 000 Eff Date: 17-05-2021 Question 3: (25 Marks) Wonder Co. acquired 70% of the equity share capital of Binder Ltd on the 1st of October 2020. The purchase price for the acquired shares was P45, 000. In addition, the companies agreed that on the 31st of December 2020 Wonder Co. will pay shareholders of Binder Ltd P1.80 for every for share that was acquired. The cost of capital for Binder Ltd is 20% and the company has not yet recovered the consideration in their books. Statements of Profit or Loss for the year ended 30th June 2021 Wonder Co. Binder Ltd P000 P000 Revenue 93,300 46,340 Cost of Sales (75,230) (32,700) Gross Profit 18,070 13,640 Distribution Expenses (1,200) (940) Administrative Expenses (4,050) (1,220) Investment Income 800 Operating Profit 13,620 11,480 Finance Costs (590) (320) Profit before tax Tax Expense Profit for the year 13,030 11,160 (3,400) (2,200) 9,630 8,960 Equity as at 1st July 2020 Wonder Co. Binder Ltd P000 P000 Equity Shares at P1 each Retained Earnings 40,000 25,000 84,000 56,000 Additional Information: At the date of acquisition, the stock market price for the shares in Wonder Co. and Binder Ltd were P9.40 and P4.50 respectively. Binder Ltd.'s policy values non-controlling interest at fair value at the date of acquisition. As a result, at acquisition date, their share price can be viewed as represented by the fair value of the shares held by the non-controlling interest. At the date of acquisition, there was one asset whose carrying value was not the same as the fair value. This was a plant, whose fair value was determined to be P900, 000 more that it's carrying amount. The plant had two (2) years remaining in its useful life. The company charged depreciation to administrative expenses. Since the acquisition, Binder Ltd had sold goods to Wonder Co. for a total of P1.2m. The mark-up Binder Ltd had on all its sales is 20% and by year end, half (1/2) of the goods were in inventory. Since the acquisition, an evaluation was done and it was determined that the goodwill of Binder LTD Page 4 of 5 should be impaired by P5m as at 30th June 2021. The impairment should be charged to Cost of Sales. The investment income in Wonder Co.'s statements represents dividends that they had received from Binder Ltd during the year. Required: i. Calculate at the date of acquisition Binder Ltd.'s consolidated goodwill. (10 marks) ii. Prepare the consolidated profit or loss statement for the group for the year ended 30th June 2021. (15 marks)