Question
The statement of financial position of J Sdn Bhd and its investee company, P Sdn Bhd as at 31 st December 2020 are shown below:
The statement of financial position of J Sdn Bhd and its investee company, P Sdn Bhd as at 31st December 2020 are shown below:
Assets Non-current Assets Freehold property, plant and equipment Investments
Current assets Inventories Trade receivables Cash
Equities & Liabilities Equity Share capital (@ RM1 per share) Retained earnings
Non-current liabilities 12% debentures
Current liabilities Bank overdraft Trade payables
| J Sdn Bhd RM 000
2,745 1,000 ------------- 3,745 -------------
575 830 50 -------------- 1,455 -------------- -------------- 5,200 ========
2,000 1,460 ------------- 3,460 ------------
500
560 680 ------------ 1,240 ------------ ------------ 5,200 ======= | P Sdn Bhd RM 000
1,625 - ------------- 1,625 -------------
300 290 120 -------------- 710 -------------- -------------- 2,335 ========
1,000 885 ------------- 1,885 ------------
100
- 350 ------------ 350 ------------ ------------ 2,335 ======= |
The following information are relevant:
(i)
(ii)
(iii)
(iv)
(v) | J Sdn Bhd acquire 600,000 ordinary shares in P Sdn Bhd on 1 January 2015 for RM 1 million when the accumulated earnings of P Sdn Bhd were RM200,000 At the date of acquisition of P Sdn Bhd, the fair value of its freehold property was considered to be RM 400,000 greater than its value in P Sdn Bhds statement of financial position. P Sdn Bhd has acquired the property on 1 January 2005 and the buildings element (comprising 50% of the total value) is depreciated on cost over 50 years.
P Sdn Bhd manufactures a component used by J Sdn Bhd only. Transfers are made by P Sdn Bhd at cost plus 25%. J Sdn Bhd held RM100,000 of these components in inventories at 31 December 2020. It is the policy of J Sdn Bhd to review goodwill for impairment annually. The goodwill in P Sdn Bhd was written-off in full some years ago. It is the groups policy to value the non-controlling interest at acquisition at fair value. The market price of the shares of the non-controlling shareholders just before the acquisition was RM1.65 |
Required:
(a) | Explain to the Management of J Sdn Bhd what is a bargain purchase and under what circumstances that it may occur. |
(b) | Compute the goodwill amount that arises from the acquisition of P Sdn Bhd as at 31 December 2020 |
(c) | Calculate the non-controlling interest balance as at 31 December 2020 |
(d) | Prepare the Consolidated Statement of Financial Position of the J Sdn Bhd group as at 31 December 2020. All relevant supporting workings have to be shown.
|
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