Question 4 (a) On 1 Apri 2020, Cambell Berhad acquired 75% of the 1,000,000 equity share of Soup Berhad. Soup Berhad had been experiencing difficult trading conditions and making significant losses. In allowing for Soup Berhad's difficulties, Cambell Berhad made an immediate cash payment of only RM15.00 per share. In addition, Cambel Berhad will pay a further amount in cash on 30 September 2021 if Soup Berhad returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimated to be RM1.8 million, but at 30 September 2020 in the light of continuing losses, its value was estimated at only RM1.5 million. The contingent consideration has not been recorded by Cambell Berhad. Overal the directors of Cambell Berhad expect the acquisition to be a bargain purchase leading to negative goodwil. At the date of acquisition, shares in Soup Berhad had a listed market price of RM8.00 each Below are the summarised draft financial statements of both companies. INCOME STATEMENTS FOR THE YEAR ENDING 30 SEPTEMBER 2020 Cambell Soup RM'000 RM 000 Revenue 100,000 68,000 Cost of sales 136,000) 67,200) Gross profit 64,000 (1.200) Other investment income 434.000 12.000) 5 Operating expenses (56,000) (2.400) Finance costs ni Profit before tax 442 000 (5.600) Income tax expense (112,000) 1,000 Profit for the year 330 000 14.600) Opening retained earnings 264 000 16,600 Profit/loss) for the year 330,000 (4.600) Dividends paid (70,000) Closing retained earnings 524.000 12.000 Required:- Using till goodwill method, compute the amount of goodwil / bargain purchase attributable to the acquisition of shares in Soup Berhad as at 30 September 2020 [10 marks] Question 4 (a) On 1 Apri 2020, Cambell Berhad acquired 75% of the 1,000,000 equity share of Soup Berhad. Soup Berhad had been experiencing difficult trading conditions and making significant losses. In allowing for Soup Berhad's difficulties, Cambell Berhad made an immediate cash payment of only RM15.00 per share. In addition, Cambel Berhad will pay a further amount in cash on 30 September 2021 if Soup Berhad returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimated to be RM1.8 million, but at 30 September 2020 in the light of continuing losses, its value was estimated at only RM1.5 million. The contingent consideration has not been recorded by Cambell Berhad. Overal the directors of Cambell Berhad expect the acquisition to be a bargain purchase leading to negative goodwil. At the date of acquisition, shares in Soup Berhad had a listed market price of RM8.00 each Below are the summarised draft financial statements of both companies. INCOME STATEMENTS FOR THE YEAR ENDING 30 SEPTEMBER 2020 Cambell Soup RM'000 RM 000 Revenue 100,000 68,000 Cost of sales 136,000) 67,200) Gross profit 64,000 (1.200) Other investment income 434.000 12.000) 5 Operating expenses (56,000) (2.400) Finance costs ni Profit before tax 442 000 (5.600) Income tax expense (112,000) 1,000 Profit for the year 330 000 14.600) Opening retained earnings 264 000 16,600 Profit/loss) for the year 330,000 (4.600) Dividends paid (70,000) Closing retained earnings 524.000 12.000 Required:- Using till goodwill method, compute the amount of goodwil / bargain purchase attributable to the acquisition of shares in Soup Berhad as at 30 September 2020 [10 marks]
