Statements of profit and loss for the year ended 31 march 2015:

	Byby	Cycle
	RM’000	RM’000
Revenue	24,200	10,800
Cost of sales	-17,800	-6,800
Gross profit	6,400	4,000
Distribution cost	-500	-340
Administrative expenses	-800	-360
Finance cost	-400	-300
Profit before tax	4700	3,000
Tax	-1700	-600
Profit after tax	3,000	2,400

Equity in the separate financial statements of Cycle as at 1 April 2014:

                                                               $’000

Equity                                                          

Equity shares of RM 1 each                                       12,000

Retained earnings                                                13,500

On 1 July 2014, ByBy acquired 80% of Cycle’s equity shares on the following terms:

• A share exchange of 2 shares in ByBy for every three shares acquired in Cycle; and
• A cash payment due on 30 June 2015 of RM1.54 per share acquired
• ByBy’s cost of capital is 10% p.a.

At the date of acquisition, shares in ByBy and Cycle had a stock market value of RM3.00 and RM2.50 each respectively.

The following information is also relevant:

1. At the date of acquisition, the fair values of Cycle’s assets were equal to their carrying amounts with the exception of an item of plant which had a fair value of RM720,000 above its carrying amount. The remaining life of the plant at the date of acquisition was 18 months. Depreciation is charged to cost of sales.
2. Sales from ByBy to Cycle in the post acquisition period were RM3 million at a markup on cost of 20%. Cycle had RM420,000 of these goods in inventory as at 31 march 2015.
3. ByBy’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose Cycle’s share price at that date can be deemed to be representative of the fair value of the shares hald by the non-controlling interest.
4. On 31 March 2015, ByBy carried out an impairment review which identified that the goodwill on the acquisition of Cycle was impaired by RM500,000. Impairment of goodwill is charged to cost of sales.

Required:

1. Prepare ByBy’s consolidated Profit and Loss account for the year ended 31 March 2015;

2. Calculate the consolidated goodwill at the date of acquisition of Cycle.

Answer rating: 100% (QA)

a BYBY Consolidated Profit and Loss Account For the year ended 31 March 2015 Revenue ByBy RM24200000 ... View the full answer