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ACCT 3132 Advanced Financial Accounting
Task
Question 1. (25 MARKS)
Glow Bhd is a manufacturer and supplier of pearls to Asean countries. In order to ensure the quality of the supplied pearls, it invested in two pearls manufacturing company in Sabah, Tahitian Bhd and Vivid Bhd. The statements of financial positions of Glow Bhd, Tahitian Bhd and Vivid Bhd as at 31 December 2019 are as follows:
|
Glow Bhd |
Tahitian |
Vivid |
|||
|
RM’000 |
RM’000 |
RM’000 |
|||
|
Non- current assets |
|||||
|
Property, plant and equipment |
155,560 |
94,000 |
32,000 |
||
|
Investment in Tahitian Bhd |
3,840 |
– |
– |
||
|
Investment in Vivid Bhd |
1,600 |
||||
|
Other long-term investment |
11,000 |
15,000 |
10,000 |
||
|
Current assets |
|||||
|
Inventories |
56,000 |
26,000 |
7,000 |
||
|
Trade receivable |
20,000 |
10,000 |
8,000 |
||
|
Bank |
8,000 |
20,000 |
5,000 |
||
|
Total assets |
256,000 |
165,000 |
62,000 |
||
|
Equity |
|||||
|
Ordinary shares |
35,000 |
4,000 |
2,000 |
||
|
Preference shares |
20,000 |
– |
– |
||
|
Retained profit |
140,000 |
95,000 |
35,000 |
||
|
General reserves |
5,000 |
4,000 |
– |
||
|
Non- current liabilities |
|||||
|
10% Debentures |
10,000 |
30,000 |
15,000 |
||
|
Current liabilities |
|||||
|
Tax payable |
11,000 |
6,000 |
5,000 |
||
|
Trade payables |
35,000 |
26,000 |
5,000 |
||
|
Total equity and liabilities |
256,000 |
165,000 |
62,000 |
Additional information:
1. Number of ordinary shares in issue as at 31 December 2019:
|
No of units |
|
|
Glow |
35,000,000 |
|
Tahitian |
4,000,000 |
|
Vivid |
2,000,000 |
2. On 1 January 2015, Glow Bhd acquired 80% of ordinary shares of Tahitian Bhd for a cash consideration of RM1.20 per unit of shares acquired. The retained profit and general reserve of Tahitian Bhd had a credit balance of RM10 million and RM2 million respectively as at the acquisition date. It was also found that one of the land of Tahitian Bhd reported a fair value of RM5 million more than its carrying value. No adjustment has been made in its accounts to incorporate the new
3. Glow Bhd also acquired 40% of Vivid Bhd’s issued ordinary shares for a cash consideration of RM1.60 million on 1 January 2018. As at the acquisition date, the balance of retained profit of Vivid Bhd was at RM12
4. During the year, Tahitian Bhd sold goods at a price of RM1 million to Glow Bhd at a profit margin of 25%. Half of these goods remained unsold as at 31 December
5. Vivid Bhd sold one of its equipment to Glow Bhd at a profit of RM20 The remaining useful life of the equipment was five years.
6. Trade payables of Tahitian Bhd include RM2 million due to Glow Bhd. This amount is after deducting a payment of RM500,000 remitted by Tahitian Bhd on 28 December 2019. The remittance was only received by Glow Bhd on 2 January
7. It is the group’s policy to recognize the non-controlling interest at its proportionate share of the fair value of the identifiable net assets of the subsidiaries on the date of
8. Goodwill on consolidation is subject to impairment loss of 20%.
Required:
Prepare the Consolidated Statement of Financial Position of Glow Bhd and its subsidiary as at 31 December 2019. Disclose all workings. (25 marks)
Question 2. (20 MARKS)
The statements of profit or loss of Sun Bhd, Aire Bhd, Sky Bhd and Sunny for the year ended 31 December 2019 are as follows:
|
Statement of Profit or Loss and Other Comprehensive Income |
|||||||
|
for the year ended 31 December 2019 |
|||||||
|
Sun Bhd |
Aire Bhd |
Sunny Bhd |
Sky Bhd |
||||
|
RM’000 |
RM’000 |
RM’000 |
RM’000 |
||||
|
Revenue |
18,000 |
15,600 |
17,600 |
1,208 |
|||
|
Cost of sales |
(8,100) |
(5,120) |
(4,510) |
(180) |
|||
|
Gross profit |
9,900 |
10,480 |
13,090 |
1,028 |
|||
|
Operating expenses |
(6,520) |
(1,010) |
(1,030) |
(200) |
|||
|
Dividend income |
5,320 |
– |
– |
– |
|||
|
Gain on sale of plant |
30 |
– |
– |
– |
|||
|
Profit before tax |
8,730 |
9,470 |
12,060 |
828 |
|||
|
Taxation |
(200) |
(90) |
(88) |
(20) |
|||
|
Profit after tax |
8,530 |
9,380 |
11,972 |
808 |
|||
|
Retained profit on 1 January 2019 |
8,100 |
6,100 |
5,684 |
2,200 |
|||
|
Ordinary dividends paid |
6,000 |
4,000 |
2,000 |
– |
|||
|
No of ordinary share capital |
11,000 |
15,000 |
6,000 |
3,000 |
|||
Additional information:
1. Sun Bhd acquired 70% of the issued ordinary shares of of Aire Bhd on 1 January 2016 with a reported retained profit of RM60 million. The fair value of the non-controlling interests in Aire Bhd on 1 January 2016 was RM3.5 million. The carrying value of all the assets of Aire Bhd reflected its fair value as at the acquisition date. Sun Bhd settle the acquisition with cash payment of RM70
2. On 1 January 2018, Aire Bhd paid RM8 million for the 90% of the interest acquired in Sunny On the acquisition date the retained profit of Sunny Bhd was RM 2.3 million. The fair value of the non-controlling interests in Sunny Bhd on 1 January 2018 was RM2.5 million.
3. Sun Bhd acquired 50% of the issued ordinary shares of Sky Bhd for a cash consideration of RM30 million on 1 July 2018. Sky Bhd is a joint venture
4. An equipment with carrying value of RM60 million for RM30 million was sold by Sun Bhd to Sunny Bhd. The remaining useful life of the equipment on that date was five
5. Aire Bhd sold goods to Sun Bhd with the selling price of RM10 million on June 2019. The profit margin was at 20% and as at 31 December 2019, Sun Bhd has sold all of these goods to third parties.
6. During the year, Sun Bhd also sold an inventory costing RM5 million for RM6 million to Sunny Bhd. Sunny Bhd yet sold any of it as at the year
7. All entities have declared and paid their dividends in December 2019. All profits and losses are deemed to accrue evenly throughout the year.
8. Group policy is to provide depreciation expense in full in the year of purchase and none in the year of disposal using straight-line method. The non- controlling interests are measured at its fair value at the acquisition date.
Required:
Construct the Consolidated Statement of Profit or Loss and Other Comprehensive for the year ended 31 December 2019. Show all relevant workings. (20 marks)
Question 3 (15 MARKS)
1. According to the relevant MFRS, differentiate the followings:
a. Control
b. Significant influence
c. Joint control (6 marks)
2. The following situation is independent:
a. Deebak Bhd acquired 60% interest in Star Bhd on 1 March 2015. On 1 January 2016, Star Bhd acquired 40% interest in Cloudy Bhd and on 1 January 2017, Deebak Bhd acquired a 40% interest in Cloudy
b. Dazzle Bhd acquired a 70% interest in White Bhd on 1 February 2015. Dazzle Bhd acquired an 90% interest in Suria Bhd on 1 July
Required:
Determine the group structure and effective controlling interest for the above situations.
3. Frozen Bhd acquired an 80% interest in Toppers Bhd on 1 June 2015 for RM40,500,000. On this date, the ordinary shares of Toppers Bhd was RM35,000,000 and the retained profit was RM10,000,000. On 1 January 2016, Toppers Bhd acquired a 70% interest in High Bhd for RM25,000,000. The retained profit and ordinary shares of High Bhd on this date were RM5,000,000 and RM20,000,000 respectively. It is the group’s policy to value non-controlling interest at their proportionate share of their fair values of the net assets of the subsidiaries on the dates of acquisitions.
Required:
Calculate the goodwill on consolidation for the ultimate parent using the single stage method of consolidation.
ACCT 3132 Advanced Financial Accounting
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