Caleb Carr Berhad is a maufacturing company incorporated in Malaysia since 2015 has acquired 4,000,000 (80%) units of ordinary shares of Ninjitsu Sdn Bhd on 1 January 2019 with the following consideration transferred:

• Cash payment of RM2.08 million; RM1 million payable on 1 January 2019 and another RM1.08 million payable on 1 January 2020.
• Ordinary shares issued by Caleb Carr, 1 share of Caleb’s for every 2 shares in Ninjitsu.
• 8% debentures issued by Caleb amounting RM1,000,000.

Only the cash payment of RM 1 million has been recorded. Cost of capital is 8%.

The following are statements of finanacial position for Caleb and Ninjitsu as at 31 December 2019:

	Caleb (RM)	Ninjitsu (RM)
Investment in Ninjitsu	1,000,000	-
Non-current assets: Land Building Plant and machinery Equipment	22,400,000 8,880,700 12,900,500 3,330,880	4,500,450 1,900,000 790,200 699,998
Current assets: Inventory Trade receivables Bank	5,554,321 5,700,987 2,778,006	1,220,600 1,467,314 194,792
Total	62,545,394	10,773,354
Ordinary shares	48,000,000	6,440,000
Revaluation reserve	5,400,300	665,000
Retained earnings @ 1 January 2019 Profit for the year	3,099,811 1,144,518	1,002,300 889,500
Trade payables	4,900,765	1,776,554
Total	62,545,394	10,773,354

 

Additional Information

 

1. The fair value of building belonging to Ninjitsu was estimated to be RM2.5million on 1 January 2019 with useful life of 20 years. One of the machinery belonging to Ninjitsu was estimated to have a fair value of RM100,000 less than its carrying value on the date of acquisition; the useful life of this machine was estimated to be 5 years. The group uses straight line depreciation method. None of these adjustments have been recorded.
2. Land belonging to Caleb and Ninjitsu are estimated to have a fair value of RM25million and RM5 million on 31 December 2019.
3. The ordinary shares prices for Caleb and Ninjitsu can be summarised as follows:
                                                                      1.1.2019                   31.12.2019

                        Caleb                                       RM2.00/share             RM2.50/share

                        Ninjitsu                                     RM1.50/share             RM1.80/share

• The group uses revaluation model and full goodwill to prepare its accounts.

 

Required:

1. Record the full investment that Caleb has in Ninjitsu. Show the relevant double entries.
2. Show the entries required to record goodwill in the consolidated accounts.
3. Record the fair value adjustments for building and machinery and the relevant depreciation adjustment.
4. Prepare the consolidated statement of financial position as at 31 December 2018.

SHOW ALL RELEVANT WORKINGS.

Answer rating: 100% (QA)

Part 1 Employment income 70000 Bonus 30000 Total employment income 100000 Federal income tax 3000 EI ... View the full answer