Naga Bhd acquired an 80% interest in Garuda Bhd on 31 December 2012. The acquisition was paid in cash RM300,000 and issued 600,000 new ordinary shares of Naga Bhd for RM1.50 per share with par value RM1.00. On this date, the financial position statement of both company before the acquisition are as follow: Assets: Cash Account Receivable Inventories Land Building - net Equipment - net Equity and Liabilities: Ordinary Shares Retained Profit Long-term Loan Account Payable Naga Bhd (RM) 460,000 200,000 180,000 800,000 900,000 640,000 3,180,000 2,100,000 880,000 200,000 3,180,000 Garuda Bhd (RM) 70,000 100,000 120,000 400,000 600,000 280,000 1,570,000 900,000 480,000 120,000 70,000 1,570,000 All identifiable assets and liabilities of Garuda Bhd are stated at fair value except land which was revalued at RM450,000. The non-controlling interest was fair valued at RM300,000. REQUIRED: a) Calculate the cost of investment in Garuda Bhd and prepare the related journal entries to record the cost of investment. b) Prepare the consolidation journal entries as at 31 December 2012. c) Prepare a consolidated statement of financial position as at 31 December 2012.

Naga Bhd acquired an 80% interest in Garuda Bhd on 31 December 2012. The acquisition was paid in cash RM300,000 and issued 600,000 new ordinary shares of Naga Bhd for RM1.50 per share with par value RM1.00. On this date, the financial position statement of both company before the acquisition are as follow: Assets: Cash Account Receivable Inventories Land Building - net Equipment - net Equity and Liabilities: Ordinary Shares Retained Profit Long-term Loan Account Payable Naga Bhd (RM) 460,000 200,000 180,000 800,000 900,000 640,000 3,180,000 2,100,000 880,000 200,000 3,180,000 Garuda Bhd (RM) 70,000 100,000 120,000 400,000 600,000 280,000 1,570,000 900,000 480,000 120,000 70,000 1,570,000 All identifiable assets and liabilities of Garuda Bhd are stated at fair value except land which was revalued at RM450,000. The non-controlling interest was fair valued at RM300,000. REQUIRED: a) Calculate the cost of investment in Garuda Bhd and prepare the related journal entries to record the cost of investment. b) Prepare the consolidation journal entries as at 31 December 2012. c) Prepare a consolidated statement of financial position as at 31 December 2012.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Naga Bhd acquired an 80% interest in Garuda Bhd on 31 December 2012. The acquisition
was paid in cash RM300,000 and issued 600,000 new ordinary shares of Naga Bhd for
RM1.50 per share with par value RM1.00. On this date, the financial position statement of
both company before the acquisition are as follow:
Assets:
Cash
Account Receivable
Inventories
Land
Building - net
Equipment - net
Equity and Liabilities:
Ordinary Shares
Retained Profit
Long-term Loan
Account Payable
Naga Bhd
(RM)
460,000
200,000
180,000
800,000
900,000
640,000
3,180,000
2,100,000
880,000
200,000
3,180,000
Garuda Bhd
(RM)
70,000
100,000
120,000
400,000
600,000
280,000
1,570,000
900,000
480,000
120,000
70,000
1,570,000
All identifiable assets and liabilities of Garuda Bhd are stated at fair value except land which
was revalued at RM450,000. The non-controlling interest was fair valued at RM300,000.
REQUIRED:
a) Calculate the cost of investment in Garuda Bhd and prepare the related journal entries
to record the cost of investment.
b) Prepare the consolidation journal entries as at 31 December 2012.
c) Prepare a consolidated statement of financial position as at 31 December 2012.

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