Statements of profit and loss for the year ended 31 march 2015:

Byby Cycle

RM'000 RM'000

Revenue 24,200 10,800

Cost of sales -17,800 -6,800

Gross profit 6,400 4,000

Distribution cost -500 -340

Administrative expenses -800 -360

Finance cost -400 -300

Profit before tax 4700 3,000

Tax -1700 -600

Profit after tax 3,000 2,400

Equity in the separate financial statements of Cycle as at 1 April 2014:

$'000

Equity

Equity shares of RM 1 each12,000

Retained earnings 13,500

On 1 July 2014, ByBy acquired 80% of Cycle's equity shares on the following terms:

-A share exchange of 2 shares in ByBy for every three shares acquired in Cycle; and

-A cash payment due on 30 June 2015 of RM1.54 per share acquired

-ByBy's cost of capital is 10% p.a.

At the date of acquisition, shares in ByBy and Cycle had a stock market value of RM3.00 and RM2.50 each respectively.

The following information is also relevant:

(i)At the date of acquisition, the fair values of Cycle's assets were equal to their carrying amounts with the exception of an item of plant which had a fair value of RM720,000 above its carrying amount. The remaining life of the plant at the date of acquisition was 18 months. Depreciation is charged to cost of sales.

(ii)Sales from ByBy to Cycle in the post acquisition period were RM3 million at a markup on cost of 20%. Cycle had RM420,000 of these goods in inventory as at 31 march 2015.

(iii)ByBy's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose Cycle's share price at that date can be deemed to be representative of the fair value of the shares hald by the non-controlling interest.

(iv)On 31 March 2015, ByBy carried out an impairment review which identified that the goodwill on the acquisition of Cycle was impaired by RM500,000. Impairment of goodwill is charged to cost of sales.

Required:

(a)Prepare ByBy's consolidated Profit and Loss account for the year ended 31 March 2015;

(18 marks)

(b)Calculate the consolidated goodwill at the date of acquisition of Cycle.

(7 marks)