Given below are the statements of financial position of King Bhd and Prince Bhd as at...

   

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Given below are the statements of financial position of King Bhd and Prince Bhd as at 30 June 2020: King Bhd (RM) Prince Bhd (RM) Non-current asset Freehold land at cost Plant and machinery at carrying value Fixtures & Fittings at carrying values Investment in Prince Bhd: 382,300 142,300 90,000 230,000 160,000 41,700 150,000 Ordinary shares at cost 282,800 25,000 10% Preference shares at cost 25,000 RM28,500 10% Debentures at cost 28,500 Currents assets Inventories Trade Receivables Bills Receivables Loan to Prince Bhd 65,900 50,500 25,000 30,000 44,000 1,166,300 25,000 60,000 34,830 Bank 71,830 623,360 Financed by: Issued and paid up capital Ordinary share capital 10% Preference share capital 500,000 150,000 200,000 90,000 Reserves General reserves 65,000 45,000 20,000 70,600 Asset revaluation reserve - Plant Retained profits 151,200 Non-current liability 10% debentures 180,000 90,000 20,000 Loan from King Bhd Current liabilities Bill payables Trade Payables Interest Payables Preference dividend payable 18,000 76,300 15,000 28,880 43,400 9,000 6,480 623,360 10,800 1,166,300 Additional information: 1. King Bhd acquired ordinary shares, 10% preference shares and 10% debentures of Prince Bhd on 1 July 2018 when the balances of its retained profit, general reserve and asset revaluation reserve are RM60,000, 40,000 and RM20,000 respectively. The balance of ordinary shares, 10% preference shares and 10% debentures on that date are as follows: RM 200.000 90,000 90,000 Unit Ordinary shares 10% Preference shares 10% Debentures 200,000 90,000 90,000 For the purposes of consideration for shares acquired on 1 July 2018, the assets of Prince Bhd were revalued. The land was revalued at RM280,000 and plant & machinery was revalued at RM10,000 below its' carrying value. King Bhd also revalued its' Freehold land at RM400,000. King Bhd and Prince Bhd had not recorded this revaluation but decided to give effect in the consolidated financial statement. King Bhd and Prince Bhd depreciated plant & machinery at 20% using the reducing balance 2. method. 3. 75% of Prince Bhd's inventories were goods purchased from King Bhd which was invoiced at 25% on cost and this amount is still owing on 30 June 2020. RM20,000 of the bills payable of Prince Bhd was in favour of King Bhd, of which RM8,000 has been discounted. 4. The differences in the loan from King Bhd and loan to Prince accounts are due to cash in transit. 5. King Bhd has not recorded its share of preference dividend and debenture interest from Prince Bhd. 6. On 1 July 2019, Prince Bhd sold fixtures with a carrying value of RM18,000 to King Bhd for RM25,000. It is the group policy to depreciate fixtures at 20% on cost. 7. On 30 June 2020, an impairment test was conducted on goodwill on consolidation and the value should be written down by 10%. 8. Required: a) Calculate goodwill or bargain purchase on business combination. b) Show the consolidation journal entries. c) Prepare a schedule showing the analysis of the group retained profit, non-controlling interest and other reserves as at 30 June 2020. d) Prepare Consolidated Statement of Financial Position of King Bhd and its subsidiary, Prince Bhd as at 30 June 2020 (Show all workings and round up to the nearest RM). 3 e) Assuming Prince Bhd declared a 10% ordinary dividend for the year ended 30 June 2020 and both Prince Bhd and King Bhd have not recorded the transaction. Prepare journal entries to affect the above transaction in the consolidated statement of financial position. Given below are the statements of financial position of King Bhd and Prince Bhd as at 30 June 2020: King Bhd (RM) Prince Bhd (RM) Non-current asset Freehold land at cost Plant and machinery at carrying value Fixtures & Fittings at carrying values Investment in Prince Bhd: 382,300 142,300 90,000 230,000 160,000 41,700 150,000 Ordinary shares at cost 282,800 25,000 10% Preference shares at cost 25,000 RM28,500 10% Debentures at cost 28,500 Currents assets Inventories Trade Receivables Bills Receivables Loan to Prince Bhd 65,900 50,500 25,000 30,000 44,000 1,166,300 25,000 60,000 34,830 Bank 71,830 623,360 Financed by: Issued and paid up capital Ordinary share capital 10% Preference share capital 500,000 150,000 200,000 90,000 Reserves General reserves 65,000 45,000 20,000 70,600 Asset revaluation reserve - Plant Retained profits 151,200 Non-current liability 10% debentures 180,000 90,000 20,000 Loan from King Bhd Current liabilities Bill payables Trade Payables Interest Payables Preference dividend payable 18,000 76,300 15,000 28,880 43,400 9,000 6,480 623,360 10,800 1,166,300 Additional information: 1. King Bhd acquired ordinary shares, 10% preference shares and 10% debentures of Prince Bhd on 1 July 2018 when the balances of its retained profit, general reserve and asset revaluation reserve are RM60,000, 40,000 and RM20,000 respectively. The balance of ordinary shares, 10% preference shares and 10% debentures on that date are as follows: RM 200.000 90,000 90,000 Unit Ordinary shares 10% Preference shares 10% Debentures 200,000 90,000 90,000 For the purposes of consideration for shares acquired on 1 July 2018, the assets of Prince Bhd were revalued. The land was revalued at RM280,000 and plant & machinery was revalued at RM10,000 below its' carrying value. King Bhd also revalued its' Freehold land at RM400,000. King Bhd and Prince Bhd had not recorded this revaluation but decided to give effect in the consolidated financial statement. King Bhd and Prince Bhd depreciated plant & machinery at 20% using the reducing balance 2. method. 3. 75% of Prince Bhd's inventories were goods purchased from King Bhd which was invoiced at 25% on cost and this amount is still owing on 30 June 2020. RM20,000 of the bills payable of Prince Bhd was in favour of King Bhd, of which RM8,000 has been discounted. 4. The differences in the loan from King Bhd and loan to Prince accounts are due to cash in transit. 5. King Bhd has not recorded its share of preference dividend and debenture interest from Prince Bhd. 6. On 1 July 2019, Prince Bhd sold fixtures with a carrying value of RM18,000 to King Bhd for RM25,000. It is the group policy to depreciate fixtures at 20% on cost. 7. On 30 June 2020, an impairment test was conducted on goodwill on consolidation and the value should be written down by 10%. 8. Required: a) Calculate goodwill or bargain purchase on business combination. b) Show the consolidation journal entries. c) Prepare a schedule showing the analysis of the group retained profit, non-controlling interest and other reserves as at 30 June 2020. d) Prepare Consolidated Statement of Financial Position of King Bhd and its subsidiary, Prince Bhd as at 30 June 2020 (Show all workings and round up to the nearest RM). 3 e) Assuming Prince Bhd declared a 10% ordinary dividend for the year ended 30 June 2020 and both Prince Bhd and King Bhd have not recorded the transaction. Prepare journal entries to affect the above transaction in the consolidated statement of financial position.

Answer rating: 100% (QA)

a Goodwill on business combination We shall calculate the good will on the purchase of business combination using the following formula Goodwill Formula is equal to Consideration paid plus Fair value ... View the full answer