Required:

1. Calculate either goodwill or gain on bargain purchase or none of it, on acquisition of

Jenny.

2. Record the journal entry for the above transactions.

3. Prepare the consolidated statement of profit or loss and other comprehensive income of Scott for the year ended 31^st March 2020.

4. Prepare the equity section (including the non-controlling interest) of the consolidated statement of financial position of Scott as at 31^st March 2020.

5. IFRS 3 Business Combinations permits a non-controlling interest at the date of acquisition to be valued by one of two methods:

i) At its proportionate share of the subsidiarys identifiable net assets; or ii) At its fair value (usually determined by the directors of the parent company) Explain the difference that the accounting treatment of these alternative methods could have on the consolidated statements, including where consolidated goodwill may be impaired.

1 12! 14! 16! I 81 1101 I 121 1141 1161 118 1201 1221 1241 1261 1281 1301 1321 1341 1361 1381 On 1st October 2019 Scott's company purchased 75% of the equity shares in Jenny's company. The acquisition was through a share exchange of two shares in Scott for every three shares in Jenny. The stock market price of Scott shares at 1st October 2019 was $4 per share. t The summarized statements of profit or loss and other comprehensive income for the two companies for the year ended 31st March 2020 are as follow:- 2 + ve Scott $'000 - 450,000 - (260,000). Jenny $'000 - 240,000 (110,000) t ! Revenue I Cost of sales - Gross profit Distribution costs Administrative expenses - Finance costs 190,000 (23,600) + (27,000) (1,500) 130,000 - (12,000). (23,000) (1,200) - t Profit before tax Income tax expense 137,900 (48,000) 93,800 - (27,800) t Profit for the year 2 89,900 66,000 Other comprehensive income - Gain on revaluation of land (Note 1) .. Loss of fair value of equity financial asset investment - 2,500 (700) - 1,000+ (400) + 1,800 600 Total comprehensive income for the year 91,700 66,600 The following information for the equity of the companies as at 1st April 2019: + + + le Scott $'000 250,000 100,000 8,400 Jenny $'000 160,000 Nile Nil 1 Equity shares of $1 each Share premium - Revaluation reserve for land- Other equity reserve (re equity financial asset investment) - Retained earnings t 3,200 - 90,000 2,200 125,000 Additional information: 1. Scott's policy is to revalue the group's land to market value at the end of each accounting period. Prior to its acquisition Jenny's land had been valued at historical cost. During the post-acquisition period Jenny's land had increased in value over its value at the date of acquisition by $1 million. Jenny has recognized the revaluation within its own financial statements. 2. Immediately after the acquisition of Jenny on 1st October 2019, Scott transferred an item of plant with a carrying amount of $4 million to Jenny at an agreed value of $5 million. At this date the plant had a remaining life of two and half years. Scott had included the profit on this transfer as a reduction in its depreciation costs. All depreciation is charged to cost of sales. 3. After the acquisition Jenny sold goods to Scott for $40 million. These goods had cost Jenny $30 million. $12 million of the goods sold remained in Scott's closing inventory. 4. Scott's policy is to value the non-controlling interest of Jenny at the date of acquisition at its fair value which the directors determined to be $100 million. 5. The goodwill of Jenny has not suffered any impairment. 6. All items in the above statements of profit or loss and other comprehensive income are deemed to accrue evenly over the year unless otherwise indicated. 1 12! 14! 16! I 81 1101 I 121 1141 1161 118 1201 1221 1241 1261 1281 1301 1321 1341 1361 1381 On 1st October 2019 Scott's company purchased 75% of the equity shares in Jenny's company. The acquisition was through a share exchange of two shares in Scott for every three shares in Jenny. The stock market price of Scott shares at 1st October 2019 was $4 per share. t The summarized statements of profit or loss and other comprehensive income for the two companies for the year ended 31st March 2020 are as follow:- 2 + ve Scott $'000 - 450,000 - (260,000). Jenny $'000 - 240,000 (110,000) t ! Revenue I Cost of sales - Gross profit Distribution costs Administrative expenses - Finance costs 190,000 (23,600) + (27,000) (1,500) 130,000 - (12,000). (23,000) (1,200) - t Profit before tax Income tax expense 137,900 (48,000) 93,800 - (27,800) t Profit for the year 2 89,900 66,000 Other comprehensive income - Gain on revaluation of land (Note 1) .. Loss of fair value of equity financial asset investment - 2,500 (700) - 1,000+ (400) + 1,800 600 Total comprehensive income for the year 91,700 66,600 The following information for the equity of the companies as at 1st April 2019: + + + le Scott $'000 250,000 100,000 8,400 Jenny $'000 160,000 Nile Nil 1 Equity shares of $1 each Share premium - Revaluation reserve for land- Other equity reserve (re equity financial asset investment) - Retained earnings t 3,200 - 90,000 2,200 125,000 Additional information: 1. Scott's policy is to revalue the group's land to market value at the end of each accounting period. Prior to its acquisition Jenny's land had been valued at historical cost. During the post-acquisition period Jenny's land had increased in value over its value at the date of acquisition by $1 million. Jenny has recognized the revaluation within its own financial statements. 2. Immediately after the acquisition of Jenny on 1st October 2019, Scott transferred an item of plant with a carrying amount of $4 million to Jenny at an agreed value of $5 million. At this date the plant had a remaining life of two and half years. Scott had included the profit on this transfer as a reduction in its depreciation costs. All depreciation is charged to cost of sales. 3. After the acquisition Jenny sold goods to Scott for $40 million. These goods had cost Jenny $30 million. $12 million of the goods sold remained in Scott's closing inventory. 4. Scott's policy is to value the non-controlling interest of Jenny at the date of acquisition at its fair value which the directors determined to be $100 million. 5. The goodwill of Jenny has not suffered any impairment. 6. All items in the above statements of profit or loss and other comprehensive income are deemed to accrue evenly over the year unless otherwise indicated