Mawar Bhd acquired 70 percent interest of the ordinary share capital of Melati Bhd on 31...

  

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Mawar Bhd acquired 70 percent interest of the ordinary share capital of Melati Bhd on 31 December 2021. In exchange for the shares in Melati Bhd, Mawar Bhd : i. issued 8 million of its ordinary shares valued at RM3.50 each ii. paid RM5,000,000 cash to the former shareholders of Melati Bhd iii. agreed to assume a liability to pay RM3,000,000 as compensation to a supplier of Melati Bhd iv. paid RM600,000 professional fees to the accountants and RM600,000 to the lawyers for their services rendered in relation to the acquisition. Below are the Statement of Financial Positions of Mawar Bhd and Melati Bhd before the acquisition took place. Statement of Financial Position as at 31 December 2021 EQUITY AND LIABILITIES Share capital of RM1.00 each Revaluation reserves Retained profits LIABILITIES Mawar Bhd RM'000 48,000 10,000 20,000 78,000 Melati Bhd RM'000 20,000 16,000 40,000 Non-current liabilities Account payables Deferred taxation TOTAL NON CURRENT ASSETS Property, plant and equipment Land Other fixed assets, at NBV CURRENT ASSETS Inventories Account receivables Cash and bank balances TOTAL 14,000 15,000 5,000 112,000 16,000 10,000 50,000 4,000 15,000 17,000 112,000 14,000 20,000 70,000 8,000 9,000 23,000 3,000 14,000 Required: a) Prepare the journal entries for consolidation for Mawar Bhd Group. b) 13,000 70,000 At the acquisition date, the freehold land and inventories of Melati Bhd had a fair value of RM13,500,000 and RM2,500,000 respectively. No adjustment had been made for this value. In addition, Mawar Bhd and Melati Bhd agreed that Melati Bhd had a brand name with a fair value of RM600,000 which was not recognized in its book. Melati Bhd has disclosed in its notes to financial statement a contingent liability involving a pending lawsuit in which the lawyer advised that there was a high probability that a company would lose the case and would then have to pay RM200,000. It is the policy of the group to measure non-controlling interest at the acquisition-date's fair value. On the acquisition date, the shares of Mawar Bhd and Melati Bhd are quoted on the stock exchange at RM3.00 and RM2.50 per share respectively. Prepare the Consolidated Statement of Financial Position for Mawar Bhd and its subsidiary as at 31 December 2021. Mawar Bhd acquired 70 percent interest of the ordinary share capital of Melati Bhd on 31 December 2021. In exchange for the shares in Melati Bhd, Mawar Bhd : i. issued 8 million of its ordinary shares valued at RM3.50 each ii. paid RM5,000,000 cash to the former shareholders of Melati Bhd iii. agreed to assume a liability to pay RM3,000,000 as compensation to a supplier of Melati Bhd iv. paid RM600,000 professional fees to the accountants and RM600,000 to the lawyers for their services rendered in relation to the acquisition. Below are the Statement of Financial Positions of Mawar Bhd and Melati Bhd before the acquisition took place. Statement of Financial Position as at 31 December 2021 EQUITY AND LIABILITIES Share capital of RM1.00 each Revaluation reserves Retained profits LIABILITIES Mawar Bhd RM'000 48,000 10,000 20,000 78,000 Melati Bhd RM'000 20,000 16,000 40,000 Non-current liabilities Account payables Deferred taxation TOTAL NON CURRENT ASSETS Property, plant and equipment Land Other fixed assets, at NBV CURRENT ASSETS Inventories Account receivables Cash and bank balances TOTAL 14,000 15,000 5,000 112,000 16,000 10,000 50,000 4,000 15,000 17,000 112,000 14,000 20,000 70,000 8,000 9,000 23,000 3,000 14,000 Required: a) Prepare the journal entries for consolidation for Mawar Bhd Group. b) 13,000 70,000 At the acquisition date, the freehold land and inventories of Melati Bhd had a fair value of RM13,500,000 and RM2,500,000 respectively. No adjustment had been made for this value. In addition, Mawar Bhd and Melati Bhd agreed that Melati Bhd had a brand name with a fair value of RM600,000 which was not recognized in its book. Melati Bhd has disclosed in its notes to financial statement a contingent liability involving a pending lawsuit in which the lawyer advised that there was a high probability that a company would lose the case and would then have to pay RM200,000. It is the policy of the group to measure non-controlling interest at the acquisition-date's fair value. On the acquisition date, the shares of Mawar Bhd and Melati Bhd are quoted on the stock exchange at RM3.00 and RM2.50 per share respectively. Prepare the Consolidated Statement of Financial Position for Mawar Bhd and its subsidiary as at 31 December 2021.

Answer rating: 100% (QA)

a Journal Entries for Consolidation Mawar Bhd Dr Share Capital 8000000 Melati Bhd Cr Share Capital 8000000 Mawar Bhd Dr Cash 5000000 Melati Bhd Cr Cash 5000000 Mawar Bhd Dr Property Plant and Equipmen... View the full answer