fa 4 chapter 4 - q1

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Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

Given below are the balance sheets of Joo Bhd and Jii Bhd as at 31 December 2009.

Joo Jii

RM RM

Land and building 250,000 150,000

Plant and machinery 100,000 80,000

Goodwill 50,000 20,000

Current assets

Inventories 50,000 50,000

Trade receivables 80,000 40,000

Bank 40,000 50,000

570,000 390,000

Ordinary shares of RM1/- each 400,000 200,000

Share premium 50,000 10,000

Profit and loss balance 100,000 50,000

10% debentures 100,000

Trade payables 20,000 30,000570,000 390,000

Additional information:

It was agreed that:

1. Joo will acquire all the assets (except cash at bank) and liabilities of Jii as at 31 December 2009.

2. The purchase consideration to consist of:

i. 300,000 ordinary shares of RM1/- each in Joo valued at per share, andii. RM12O,000 8% debentures in Joo to discharge the I0% debentures of Jii at a premium

of 20%.

3. The fair value of the assets of Jii was:

RM

Land and building 350,000

Plant and machinery 50,000

Inventories 50,000

Trade receivables 40,000

4. Joo has agreed to pay the liquidation expenses of Jii which amount to RM12,000.

You are required to:

a. Close the books of Joo by means of ledger entries;

b. Record the above transactions in the books of Joo; and

c. Prepare the balance sheet of Joo immediately after the absorption of Joo.

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Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

Purchase consideration RM

For the benefit of ordinary shareholders 300,000 ordinary shares

of RM1/- each issued at RM1.25 per share (300,000 x RM1.25)

375,000

For the benefit of debenture holders 8% debentures 120,000

Liquidation expenses paid by Joo for Jii cash 12,000

507,000

Calculation of goodwill

RM

Tangible assets taken over Land and building 350,000

Plant and machinery 50,000

Inventories 50,000

Trade receivables 40,000

490,000

Liabilities taken over Trade payables (30,000)

Net tangible assets taken over 460,000

Purchase price 507,000

Goodwill 47,000

a. Ledger entries to close the books of Jii

Realisation account

RM RM

Goodwill 20,000 Joo 495,000

Land and building 150,000 Trade payable 30,000

Plant and machinery 80,000

Inventories 50,000

Trade receivables 40,000

Debenture holders account 20,000Sundry members account 165,000

525,000 525,000

Purchasers account

RM RM

Realisation account 495,000 8% debentures in Joo 120,000

Ordinary shares in Joo 375,000

495,000 495,000

Debenture holders account

RM RM

8% debentures in Zee 120,000 10% debentures 120,000

Realisation account 375,000

120,000 495,000

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Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

Sundry members account

RM RM

Bank 50,000 Ordinary share capital 200,000

Ordinary shares in Zee 375,000 Profit and loss account 50,000

Share premium 10,000

Realisation account 165,000

425,000 425,000

b. Journal entries to record the absorption of Joo

Debit Credit

RM RM

a. Business purchase account 507,000

Liquidator of Jii 495,000

Bank 12,000

(Being the agreed purchase price)

b. To record the assets acquired at fair valueAssets received

Land and building 350,000

Plant and machinery 50,000

Inventories 50,000

Trade receivables 40,000

Goodwill 47,000

Trade payables 30,000

Business purchase account 507,000

(Being assets and liabilities acquired)

c. Joo 495,000

8% debentures 120,000Ordinary share capital 300,000

Share premium 76,000

(Being issue of shares in settlement of purchase price)

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Hak Milik Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

Joo

Balance sheet as at 31 December 2009

RM RM

Land and building 600,000

Plant and machinery 150,000

Goodwill (50,000 + 47,000) 97,000

847,000

Current assets

Inventories 100,000

Trade receivables 120,000

Bank 28,000 248,000

1,095,000

Issued and paid up capital:

700,000 ordinary shares 700,000

Share premium 125,000

Profit and loss account 100,000

925,000

Non-current liabilities

8% debentures 120,000

Current liabilities

Trade payables 50,000

1,095,000