Group statement

On 1 October 2021 jim acquired 3,840,000 equity shares of Supercut’s total equity
shares on the following terms:
? a share exchange of three shares in jim for every six shares acquired in
Supercut; and
? a cash payment due on 30 June 2022 of MUR 1·80 per share acquired (Ignore
cost of capital).
At the date of acquisition, shares in jim and Supercut had a stock market value of
MUR 5·00 and MUR 2·00 each respectively.
Statements of profit or loss for the year ended 30 June 2022:
jim
MRU
Revenue
9,680,000
Supercut
MUR
Cost Of Sales
4,320,000
Gross Profit
(7,120,000) (2,720,000)
2,560,000
Distribution Costs
1,600,000
Administrative Expenses
(200,000)
(136,000)
Finance Costs
(320,000)
(144,000)
Profit before tax
(160,000)
1,880,000
(120,000)
Income tax expense
1,200,000
Profit for the year
(680,000)
(240,000)
1,200,000
960,000
Equity in the separate financial statements of Supercut as at 1 July 2021:
Equity
Equity shares of MUR 1
MUR
Retained earnings
4,800,000
5,400,000

I. At the date of acquisition, the fair values of Supercut’s assets were equal to their
carrying amounts with the exception of an item of plant which had a fair value of
MUR 288,000 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.

II. Sales from jim to Supercut in the post-acquisition period were MUR 2,000,000
at a mark-up of 20%. Supercut had MUR 1,680,000 of these goods in inventory
as at 30 June 2022.

III. jim ’s policy is to value the non-controlling interest at fair value at the date of
acquisition. For this purpose, Supercut’s share price at that date can be deemed
to be representative of the fair value of the shares held by the non-controlling
interest.

IV. On 30 June 2022, jim carried out an impairment review which identified that
the goodwill on the acquisition of Supercut was impaired by MUR 200,000.
Impaired goodwill is charged to cost of sales.

Required:
a) Calculate goodwill at the date of acquisition of Supercut.
b) Prepare jim ’s consolidated income statement for the year ended 30 June 2022