Question 1

Hagi Sdn. Bhd.(HSB) and Maru Son. Bhd.(MSB) were in the same line of business, dealing with computer parts. In order to enjoy economies of scale, HSB had agreed to be taken over by the MSB on 31 December 2019. The terms of absorption as agreed by both companies were as follows: 1. MSB is to take over all the assets and liabilities (except bank overdraft and accounts payable) of HSB. The agreed values for the assets were! Assells RM Land and building 300,000 Plant and machinery 287 500 Motor vehicles 182.500 Furniture and fittings 58,000 Inventories 45,000 Accounts receivables 30,000 2. The bank overdraft was to be settled by HSB. 3. The accounts payable of HSB was to be settled for RM18,000 as full settlement. 4. MSB is to pay RM2,000 for the liquidation expenses of HSB. 5. The settlement of purchase price was as follows: a. To the ordinary shareholders: 500,000 fully paid ordinary shares in MSB issued at par. i. Cash of RM40,000. b. To the 8%% preference shareholders: L Sufficient 7.5% preference shares of RM1.00 each at par in MSB to enable the shareholders to receive the same amount of dividends as they received from HSB.C. To the 6%% debenture holders: L 7.5% preference shares of IRM1.00 each at par to discharge the 6% debenture at par. 3. MSB also made a right issue of 20,000 units ordinary shares al RM1.00 per share. All the shares were fully paid and subscribed. Given below are the summarized Statement of Financial Position of the two companies as at 31 December 2019: Maru Sdn. Bhd. Hagi Sdn. Bhd. Land and building (cost) 516.000 288,000 Plant and machinery (cost) 586,000 352,000 Provision for depreciation (102,800) 463,200 (70,400) 281,600 Motor vehicle (cost) 3507000 232,000 Provision for depreciation (76,000) 274,000 (46,400) 185.600 Furniture and fillings (cost) 71,800 Provision for depreciation (18,000) 68.000 (14,000) 57,800 Investment in Rezha Sdn. Bhd. 113,800 Inventories 561000 487000 Accounts receivables 44.000 34.000 Banks 84.000 1,619,000 903.000 Ordinary shares of RM1 each 1,000,000 500.000 7.5% preference shares of 500,000 RM1 each 8% preference shares @ RM1 300.000 Share premium 15,000 Retained profits 637000 6% debentures 20,000 Accounts payable 36,000 18.000 Bank overdraft 15,000 1,619.000 903.000You are required to: a. determine the purchase price and goodwill (if any) of MSB. (6 marks) b. prepare the realization account, sundry members account (induding debenture holders account) to close the books of HSB. (12 marks) C. prepare the Statement of Financial Position of MSB immediately after the absorption. (8 marks)