Example $5$

Widury Bhd $($WB$)$ purchased Ikhwan Sdn Bhd $($ISB$)$ on $1$ January $2019.$ On the date of purchase the Retained Profits, Share Premium, and General Reserve of ISB was as follows:

$\backslash$table$[[,$Ikhwan Sdn Bhd$],[($RM$),],[$Retained Profits,$50,000],[$Share Premium,$50,000],[$General Reserve,$50,000]]$

The Statement of Financial Position and Comprehensive Income of the two companies for the year ended $2020$ were as follows:

$\backslash$table$[[,($RM$),($RM$)],[,$WB$\_,$ISB$\_\_],[$Share capital of RM$1$ each,$500,000,200,000],[$Revaluation Reserve,$100,000,100,000],[$Share premium,$100,000,100,000],[$General reserve,$110,000,100,000],[$Retained profits,$114,700,125,500],[$Current liabilities,$150,000,100,000],[$Loan from WB$,,50,000],[$Long$-$term loans,$130,000,60,000],[1,204,700,835,500],[$Property$,$ plant & equipment, at NBV$,714,000,573,000],[$Investments$,$ at cost$],[140,000$ shares in IESB, at cost$,300,000,-],[$Loan to IESB,$50,000,],[$Current assets,$140,700,262,500],[1,204,700,835,500],[$Revenue$,1,000,000,500,000],[$Operating expenses,$(862,000),(450,000)],[$Profit from operations,$138,000,50,000],[$Finance costs,$(10,000),(2,000)],[$Profit before tax,$128,000,48,000],[$Taxation$,(33,300),(12,500)],[$Profit after tax,$94,700,35,500],[$Retained profits brought forward,$40,000,100,000],[$Available for appropriation,$134,700,135,500],[$Dividends paid,$(20,000),(10,000)],[$Retained profits carried forward,$114,700,125,500]]$

Additional information:

a$)$ Included in the property, plant & equipment of IESB was freehold land at a cost of RM$30,000.$ At the date of the acquisition of these two companies, the fair value of IESB$$s land was RM$80,000.$ At the date of acquisition,

no adjustments have been made in the accounts of these two companies for fair values. However, as of the current year reporting date, the adjustments have been included in the subsidiary accounts.

b$)$ On $1$ January $2020,$ IESB sold Plant & Equipment $($PE$)$ to WEB for RM$200,000.$ The PE$$s cost to IESB was RM$150,000.$ WEB classified the asset purchased as another PE$.$ Depreciation charges for the group are at $25\%$ per annum.

c$)$ On $31$ December $2020,$ WEB held stocks purchased from IESB amounting to RM$200,000($invoiced price$).$ The intercompany sales in the current year amounted to RM$500,000$ in total. These sales had a profit margin of $20\%$ from the invoice price.

d$)$ On $31$ December $2020,$ WEB sold Plant & Equipment $($PE$)$ to IESB at RM$100,000.$ The PE$$s cost to WEB was RM$70,000.$ IESB classified the assets purchased as another PE$.$ Depreciation charges for the group are at $25\%$ per annum.

e$)$ WEB provided consultancy services to IESB. For the year $2020,$ the management fees were RM$100,000.$ IESB classified the fees as finance costs while WEB treated the fees as normal revenue. At the end of the year, the management fees have not been paid by IESB to WEB. The unpaid amounts were classified as short$-$term in nature.

f$)$ Full goodwill method shall be used. No impairment of goodwill shall be recorded.

g$)$ Assume an income tax rate of $25\%.$ Ignore tax effect on intercompany transactions.

Required:

$1).$ Calculate goodwill that the group will recognize in the CFS$.$

$2).$ Calculate NCI shares in pre$-$ and post acquisition reserves.

$3)$ Raise general journals to record all the elimination journals for the above group. No goodwill value shall be allocated to NCI.

$4).$ Prepare a worksheet for the group for the year ended $31$ December $2020.$