BKAR3043 Financial Accounting & Reporting IV
BKAR 3043 Financial Accounting and Reporting IV
TUTORIAL 2 A212
Submission Date: 23/04/2022
QUESTION 1
On 1 October 2020, GD Berhad bought 70% holding in the equity of ST Berhad for a
purchase consideration of RM520,000,000. At the time of acquisition, ST Berhad’s share
price was at RM2.60 per unit, share capital was RM300,000,000, retained earnings was
RM270,000,000 and revaluation reserves was RM80,000,000. ST Berhad failed to make
adjustment for the fair value of the freehold land at the value of RM50,000,000. The group
policy is to apply the fair value to measure the non-controlling interest.
The financial statements of GD Berhad and its subsidiary for the year ended 30 September
2021 were presented below:
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 September 2021
GD Berhad ST Berhad
RM’000 RM’000
Revenue 240,000 160,000
(–) Cost of sales (100,000) (60,000)
Gross profit 140,000 100,000
Other income 90,000 10,000
Operating expenses (50,000) (30,000)
Finance cost (20,000) (15,000)
Profit before taxation 160,000 65,000
Taxation (40,000) (25,000)
Profit for the year 120,000 40,000
Other comprehensive income
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BKAR3043 Financial Accounting & Reporting IV
Gains on revaluation of property 30,000 -
Total comprehensive income 150,000 40,000
Statements of Changes in Equity (Partial)
For the year ended 30 September 2021
GD Berhad ST Berhad
RM’000 RM ’000
Retained earnings brought forward 460,000 270,000
+ Profit for the period 120,000 40,000
– Proposed dividend - (10,000)
– Dividend (40,000)
Retained earnings carried forward 540,000 300,000
Statement of Financial Position
As at 30 September 2021
GD Berhad ST Berhad
RM’000 RM’000
Non-current assets
Property, plant and equipment 790,000 660,000
Investment properties 150,000 120,000
Investment in joint venture 140,000 -
Investment in subsidiary 520,000 -
1,600,000 780,000
Current assets
Inventory 210,000 310,000
Trade receivables 293,000 480,000
Dividend receivable 7,000 -
Amount owed by ST Berhad 30,000 -
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BKAR3043 Financial Accounting & Reporting IV
Cash and bank balances 110,000 80,000
650,000 870,000
Total assets 2,250,000 1,650,000
Equity and liabilities:
Share capital of RM1 each 600,000 300,000
Retained earnings 540,000 300,000
Revaluation reserves 50,000 80,000
Total equity 1,190,000 680,000
Non-current liabilities
Deferred taxation 160,000 100,000
Long-term debt 420,000 380,000
580,000 480,000
Current liabilities
Trade payables 310,000 390,000
Amount owing from GD Berhad - 30,000
Dividend proposed - 10,000
Tax payable 170,000 60,000
480,000 490,000
Total liabilities 1,060,000 970,000
Total equity and liabilities 2,250,000 1,650,000
Additional information:
1. Impairment losses of RM4 million were deemed to have arisen by 30 September 2021
in respect of goodwill of ST Berhad. The impairment losses were classified under
other expenses account.
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BKAR3043 Financial Accounting & Reporting IV
2. During the financial year ended 30 July 2021, ST Berhad had sold goods to GD
Berhad amounting to RM15,000,000. The profit margin is 20% on selling price. Of
these goods, one-third remained in the closing inventory of GD Berhad n at the
reporting date.
3. ST Berhad sold a piece of machinery to GD Berhad for RM10,000,000 on 1 October
2020. This equipment had a carrying value of RM4,000,000 prior to transfer. The gain
on sale was shown as ‘other income’ in the books of ST Berhad. The equipment had a
four-year useful economic life remaining at the date of transfer. The depreciation was
classified under other expenses account
4. On 1 July 2021, ST Berhad declared a dividend of RM10,000,000 out of post-
acquisition profits. GD Berhad recorded its share of dividend as ‘other income’.
5. GD Berhad has joint venture arrangement with FDS Berhad for CRS Sdn Bhd,
sharing of control with ownership of 50 percent by each party since year 2016. During
the year, CRS Sdn Bhd net profit after tax amounting to RM60,000,000. There are
some year-end transactions not accounted in the CRS Sdn Bhd financial statements as
follows:
No Details Amount (RM)
1 Salary and allowances paid to foreign workers 60,000
2 Utility bills paid 30,000
3 Gain from disposal of machinery 10,000
4 Depreciation for equipment 20,000
6. Taxation rate is 24%. The tax effects on unrealized profit for intragroup and other
relevant transactions need to be accounted.
REQUIRED (To show all the workings):
(a) Calculate the goodwill on consolidation.
(b) Prepare the relevant consolidation journal entries for the year ended 30 September
2021.
(c) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income
of GD Berhad for the year ended 30 September 2021.
(d) Prepare the Consolidated Statement of Financial Position of GD Berhad as at 30
September 2021.
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BKAR3043 Financial Accounting & Reporting IV
QUESTION 2
XX Bhd acquired 65% interest in the equity capital of BB Bhd on 1 January 2015. At the
acquisition date, the retained earnings and the revaluation reserve of BB Bhd were
RM33,000,000 and RM24,000,000 respectively. The share price of BB Bhd was fair valued
at RM2.00 per share on this date. All assets and liabilities of BB Bhd were stated at fair value
except land which was understated by RM5,000,000. BB Bhd had accounted this revaluation
in its book.
The financial statements of XX Bhd and BB Bhd for the year ended 31 December 2021 are
as follows:
Statements of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2021
XX Bhd BB Bhd
RM’000 RM’000
Turnover 165,000 66,000
Cost of sales (66,000) (33,000)
Gross profit 99,000 33,000
Other income 31,020 6,600
Dividend income 2,925 -
Operating expenses (85,472) (19,800)
Profit before taxation 47,473 19,800
Tax expenses (11,137) (4,950)
Profit for the period 36,336 14,850
Statements of Changes in Equity
for the year ended 31 December 2021 (Partial)
XX Bhd BB Bhd
RM’000 RM’000
Retained earnings brought forward 173,316 59,796
+ Profit for the period 36,336 14,850
– Dividend (18,000) (4,500)
Retained earnings carried forward 191,652 70,146
Statement of Financial Position as at 31 December 2021
XX Bhd BB Bhd
RM’000 RM’000
Non-Current Assets
Land 280,500 150,000
Properties, plants and equipment 247,500 112,200
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BKAR3043 Financial Accounting & Reporting IV
Investments in BB Bhd 198,000 -
Total Non-Current Assets 726,000 262,200
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BKAR3043 Financial Accounting & Reporting IV
Current Assets
Inventories 99,000 51,150
Accounts receivable 41,250 31,878
Cash and bank balances 60,390 7,706
Total Current Assets 200,640 90,734
Total Assets 926,640 352,934
Equity And Liabilities
Share capital 330,000 150,000
Retained earnings 191,652 70,146
Revaluation reserves 171,600 33,000
693,252 253,146
Liabilities
Accounts payable 80,917 70,583
Deferred taxation 42,471 29,205
Long term loan 110,000 -
Total Liabilities 233,388 99,788
Total Equity And Liabilities 926,640 352,934
Additional information:
1. Number of ordinary shares of XX Bhd and BB Bhd are 165,000,000 units and
150,000,000 units respectively. Assume no changes in the share capital for both
companies.
2. On 1 April 2019, XX Bhd sold an equipment to BB Bhd for RM3,000,000. The
equipment was bought by XX Bhd on 1 September 2014 at a cost of RM4,000,000. The
group policy is to depreciate this type of equipment on a straight line basis over an
estimated useful life of 10 years (Note: remaining 6 years) and to provide a full year’s
depreciation if the equipment has been used for more than 6 months in the year.
3. BB Bhd revalued its land on 31 December 2020 and a revaluation surplus of
RM9,000,000 was recognized.
4. During the year 2021, BB Bhd sold merchandise to XX Bhd for invoiced amounts
totaling RM2,500,000 of which RM600,000 remained in the closing inventory of XX
Bhd at 31 December 2021. The corresponding intercompany sales and closing
inventories figures for the 2020 financial year were RM2,100,000 and RM400,000
respectively. The profit margin to BB Bhd was 20% on selling price.
5. The group uses the fair value method to measure the non-controlling interest.
6. The tax effects on unrealized profit for inter companies transactions need to be
accounted for.
7. The company’s income tax rate remains 25% throughout the years.
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BKAR3043 Financial Accounting & Reporting IV
REQUIRED:
(a) Prepare the relevant consolidation journal entries for the year ended 31 December
2021.
(b) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive
Income for XX Bhd and its subsidiary for the year ended 31 December 2021.
(c) Prepare the Consolidated Statement of Financial Position for XX Bhd and its
subsidiary as at 31 December 2021.
QUESTION 3
Globe Bhd had acquired 75% interest in the equity capital of Setia Bhd on 1 January 2017.
On the acquisition date, the retained earnings of Setia Bhd were RM12,000,000. A freehold
land of Setia Bhd recorded at cost of RM5,500,000. But the freehold land was said to have a
fair value of RM7,500,000. There are no adjustment had been made in the Setia Bhd’s
accounts to reflect the fair values. The share price of Setia Bhd was fair valued at RM1.60 per
share. Setia Bhd’s shares were issued at RM1.00 per share. The financial statements of both
companies 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
Globe Bhd Setia Bhd
RM’000 RM’000
Turnover 65,250 39,000
Cost of sales (23,400) (17,550)
Gross profit 41,850 21,450
Gain from disposal of land - 1,120
Dividend income 7,882.5 -
Operating expenses (26,782.5) (10,310)
Profit before taxation 22,950 12,260
Tax expenses (5,967) (2,408)
Profit for the year 16,983 9,852
Other comprehensive income
Gains on revaluation of property 2,000 -
Total comprehensive income 18,983 9,852
Statements of Changes in Equity (Partial)
For the year ended 31 December 2019
Globe Bhd Setia Bhd
RM’000 RM’000
Retained earnings brought forward 92,750 22,500
+ Profit for the period 16,983 9,852
– Proposed dividend (14,300) (7,160)
– Dividend (8,400) (3,000)
Retained earnings carried forward 87,033 22,192
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BKAR3043 Financial Accounting & Reporting IV
Statement of Financial Position
As at 31 December 2019
Globe Bhd Setia Bhd
RM’000 RM’000
NON-CURRENT ASSETS
Property, plant and equipment 217,300 89,000
Investments in Setia Bhd 78,000 -
Investment in Tower Bhd 15,000 -
Total non-current assets 310,300 89,000
CURRENT ASSETS
Inventories 35,250 14,081
Accounts receivable 5,625 15,919
Dividend receivable 5,370 -
Loan receivable from Setia Bhd 3,000 -
Cash and bank balances 16,500 12,122
Total current assets 65,745 42,122
TOTAL ASSETS 376,045 131,122
EQUITY
Share capital 200,000 80,000
Retained earnings 87,033 22,192
Revaluation reserves -
19,500
Total equity 306,533 102,192
NON-CURRENT LIABILITIES
Loan 29,000 8,105
Deferred taxation 7,212 3,275
Total non-current liabilities 36,212 11,380
CURRENT LIABILITIES
Accounts payable 19,000 7,390
Loan payable to Globe Bhd - 3,000
Dividend payable 14,300 7,160
Total current liabilities 33,300 17,550
TOTAL LIABILITIES 69,512 28,930
TOTAL EQUITY AND LIABILITIES 376,045 131,122
Additional information:
1. Setia Bhd sold inventories to Globe Bhd totalling RM7,500,000 during the year 2019.
Out of this amount, RM3,000,000 still remained in the ending inventories of Globe
Bhd at the year end. The corresponding closing inventories amount in the year 2018
was RM5,200,000 in the book of Globe Bhd. The profit margin is 20% on selling
price.
2. On 1 April 2018, Setia Bhd sold an equipment to Globe Bhd for RM10,800,000. The
equipment was bought by Setia Bhd on 1 March 2014 at a cost of RM14,000,000. The
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BKAR3043 Financial Accounting & Reporting IV
group policy is to depreciate this type of equipment on a straight line basis over an
estimated useful life of 10 years and to provide a full year’s depreciation if the
equipment has been used for more than 6 months in the year.
3. Globe Bhd uses the proportionate share of the net identifiable assets method to
measure the non-controlling interest. Assume no changes in the share capital for both
companies.
4. Besides the proposed dividend, Setia Bhd also declared and paid dividend of
RM3,000,000
5. Globe Bhd had acquired 35% interest in the equity capital of Tower Bhd on 1 January
2019. Tower Bhd profit for the year 2019 is RM3,500,000 (after tax).
6. Tower Bhd declared and paid dividend of RM750,000 in year 2019.
7. On 31 December 2019, Tower Bhd has inventory balance with profit 30% on selling
price amounting to RM7,200,000. This inventory was purchased from Globe Bhd
amounting to RM18,000,000 in year 2019.
8. The company’s income tax rate for the year was 24%. The tax effects on unrealized
profit for intragroup transactions need to be accounted for.
REQUIRED:
(a) Calculate the goodwill on consolidation.
(b) Prepare the relevant consolidation journal entries at 31 December 2019.
(c) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive
Income for Globe Bhd for the year ended 31 December 2019.
(d) Prepare the Consolidated Statements of Changes in Equity for Globe Bhd for the year
ended 31 December 2019.
(e) Prepare the Consolidated Statement of Financial Position for Globe Bhd for the year
ended 31 December 2019.
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