QUESTION

Meranti Bhd acquired a 80% interest in Cengal Bhd on 31 December 2012 by paying cash
RM300,000 and issuing 30,000 shares of Meranti Bhd, RM10 par ordinary share with a market
value of RM20 per share. Other costs incurred for the acquisition were legal fees RM27,000 and
consulting fees RM18,000. Given that the cost of investment has been taken into account, the fair
value of assets and liabilities at the acquisition date are as follows:
Meranti Bhd
RM 735,000
150,000
135,000
600,000
675,000
480,000
RM 2,775,000
==========
Share capital
RM1,500,000
Share premium
150,000
Retained earnings
675,000
Long-term loan
Account payables
450,000
Total liabilities and equity RM 2,775,000
==========
Cash
Account receivable
Inventories
Land
Building net
Equipment net
Total assets

Cengal Bhd
RM 52,500
75,000
90,000
300,000
450,000
210,000
RM 1,177,500
==========
RM 450,000
225,000
360,000
90,000
52,500
RM 1,177,500
==========

The fair value of the remaining 20% non-controlling interest (NCI) was RM225,000 at the
acquisition date. However, the assets of land and building (net) have not been revalued to the
amount of RM364,500 and RM440,000 respectively and account payables are understated by
RM12,500 during the acquisition of Cengal Bhd.
REQUIRED:
(a) Prepare a journal entry to record an acquisition of Cengal Bhd on 31 December 2012.
(b) Calculate the amount of goodwill at the acquisition date (NCI of Cengal Bhd is based on fair
value).
(c) Prepare the Consolidated Statement of Financial Position of Meranti Bhd and subsidiary as at
31 December 2012.

QUESTION
Meranti Bhd acquired a 80% interest in Cengal Bhd on 31 December 2012 by paying cash
RM300,000 and issuing 30,000 shares of Meranti Bhd, RM10 par ordinary share with a market
value of RM20 per share. Other costs incurred for the acquisition were legal fees RM27,000 and
consulting fees RM18,000. Given that the cost of investment has been taken into account, the fair
value of assets and liabilities at the acquisition date are as follows:
Meranti Bhd
Cengal Bhd
Cash
RM 390,000 RM 52,500
Investment in Cengal Bhd
900,000
Account receivable
150,000
75,000
Inventories
135,000
90,000
Land
600,000
300,000
Building net
675,000
450,000
Equipment net
480,000
210,000
Total assets
RM3,330,000 RM 1,177,500
========== ==========
Share capital
RM1,800,000 RM 450,000
Share premium
450,000
225,000
Retained earnings
630,000
360,000
Long-term loan
90,000
Account payables
450,000
52,500
Total liabilities and equity RM3,330,000 RM 1,177,500
========== ==========
The fair value of the remaining 20% non-controlling interest (NCI) was RM225,000 at the
acquisition date. However, the assets of land and building (net) have not been revalued to the
amount of RM364,500 and RM440,000 respectively and account payables are understated by
RM12,500 during the acquisition of Cengal Bhd.
REQUIRED:
(a) Prepare a journal entry to record an acquisition of Cengal Bhd on 31 December 2012.
(b) Calculate the amount of goodwill at the acquisition date (NCI of Cengal Bhd is based on fair
value).
(c) Prepare the Consolidated Statement of Financial Position of Meranti Bhd and subsidiary as at
31 December 2012.