TUTORIAL QUESTIONS OF BKAF 3073 IN A142 15th
TUTORIAL 1 – BUSINESS COMBINATION
SUBMISSION DATE:
QUESTION 1
On 1 January 2014, Moon Bhd paid RM700,000 cash, issued a three year 6% note payable with a face value of RM1,500,000 and 100,000 ordinary shares with a par RM1.00 to acquire 70% interest in Star Bhd. Moon Bhd ordinary share has a market value of RM2.60 per share on that date. Moon Bhd also issued 18,000 of its shares for other direct costs of the acquisition and total cost of registration for all the above ordinary shares was RM40,000 not yet paid. Summary information for both companies immediately before the acquisition is as follows:
Moon Bhd Star Bhd Star Bhd Book Value Book Value Fair Value RM RM RM
Cash 1,400,000 160,000 160,000
Inventories 580,000 360,000 400,000
Other current assets 320,000 80,000 80,000
Land 1,000,000 500,000 930,000
Building - net 1,200,000 900,000 1,300,000
Machinery – net 700,000 400,000 360,000
Total Assets 5,200,000 2,400,000 3,230,000
Current liabilities 640,000 120,000 120,000
Other liabilities 320,000 200,000 160,000
Ordinary shares, RM1 par 2,000,000 1,000,000
Share premium 600,000 300,000
Retained earnings 1,640,000 780,000
Total Liabilities and Equity 5,200,000 2,400,000
REQUIRED:
(a) Calculate cost of acquisition on Star Bhd by Moon Bhd. (Round off your answer to the nearest Ringgit)
(b) Prepare all necessary journal entries to record the acquisition of Star Bhd by Moon Bhd.
(c) Prepare the consolidated statement of financial position of Moon Bhd and its subsidiary immediately after acquisition assuming the group used the proportionate share of net assets method to record the non-controlling interest.
QUESTION 2
Scope Bhd acquired a 60% interest in the equity capital of Bue Bhd on 31 December 2014. On this date, the market price of Blue Bhd’s ordinary share is RM1.70 per share. In exchange for the shares in Blue Bhd, Scope Bhd issued 15 million of its ordinary shares valued at RM3.00 each and paid the balance in cash to the former
SUBMISSION DATE:
QUESTION 1
On 1 January 2014, Moon Bhd paid RM700,000 cash, issued a three year 6% note payable with a face value of RM1,500,000 and 100,000 ordinary shares with a par RM1.00 to acquire 70% interest in Star Bhd. Moon Bhd ordinary share has a market value of RM2.60 per share on that date. Moon Bhd also issued 18,000 of its shares for other direct costs of the acquisition and total cost of registration for all the above ordinary shares was RM40,000 not yet paid. Summary information for both companies immediately before the acquisition is as follows:
Moon Bhd Star Bhd Star Bhd Book Value Book Value Fair Value RM RM RM
Cash 1,400,000 160,000 160,000
Inventories 580,000 360,000 400,000
Other current assets 320,000 80,000 80,000
Land 1,000,000 500,000 930,000
Building - net 1,200,000 900,000 1,300,000
Machinery – net 700,000 400,000 360,000
Total Assets 5,200,000 2,400,000 3,230,000
Current liabilities 640,000 120,000 120,000
Other liabilities 320,000 200,000 160,000
Ordinary shares, RM1 par 2,000,000 1,000,000
Share premium 600,000 300,000
Retained earnings 1,640,000 780,000
Total Liabilities and Equity 5,200,000 2,400,000
REQUIRED:
(a) Calculate cost of acquisition on Star Bhd by Moon Bhd. (Round off your answer to the nearest Ringgit)
(b) Prepare all necessary journal entries to record the acquisition of Star Bhd by Moon Bhd.
(c) Prepare the consolidated statement of financial position of Moon Bhd and its subsidiary immediately after acquisition assuming the group used the proportionate share of net assets method to record the non-controlling interest.
QUESTION 2
Scope Bhd acquired a 60% interest in the equity capital of Bue Bhd on 31 December 2014. On this date, the market price of Blue Bhd’s ordinary share is RM1.70 per share. In exchange for the shares in Blue Bhd, Scope Bhd issued 15 million of its ordinary shares valued at RM3.00 each and paid the balance in cash to the former