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FAR610 – JAN 2018

SUGGESTED SOLUTIONS FAR 610 – JANUARY 2018

QUESTION 1A

a) Compute the goodwill/bargain purchase on acquisition of Mentarang Bhd and Lokan Bhd.

Goodwill GRP NCI


RM'000 RM'000 RM'000 RM'000 RM'000
Mentarang
1/1/16 OS
Consideration 270-(120*0.75) 180,000.00 ///
NCI (Proportionate) 30% 71,100.00 // 71,100.00
251,100.00

FV of NA Acquired
Share capital 156,000.00/
Retained earning 50,000.00/
Share premium 23,000.00/
ARR Land 5,000.00/
ARR Licence 3,000.0/ (237,000.0)
Goodwill from OS 14,100.0
Impairment (3,000.0) (3,000.0)
Goodwill as at YE 11,100.0 11,100.0
Preference shares 60,000.0

Lokan
1/4/17 OS
Consideration Cash 8,500.0 /
(75000*1.20) Issue share 90,000.0 //
For OS + PS 98,500.0
PS (30,000.0)/
NCI (Fair value) 25,000.0 / 25,000.0
93,500.0
FV of NA Acquired
Share capital 80,000.0 /
RE b/d 18,000.0 /
CY before DOA (2,625.0)/
10.5*3/12 (95,375.0)
Goodwill from OS (1,875.0)
Impairment -
Bargain Purchase (1,875.0) 1,875.0

Preference shares -

11,100.0 (1,125.0) 156,100.0

(18/ x ½ = 9 marks)

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FAR610 – JAN 2018

b) Calculate gain/ (loss) on second acquisition of Mentarang Bhd’s shares.


SECOND ACQUISTION MENTARANG 1/1/17 RM'000 RM'000
Consideration for second acquisition 30,000.00 /

FV of NA acquired on second acquisition


Share capital 156,000.00 /
Retained earning 55,500.00 /
Share premium 23,000.00 /
ARR Land 5,000.00 /
ARR Licence 3,000.00 /
242,500.0
Interest of second acquisition 0.20 / (48,500.00)
(18,500.00)
-
Gain on second acquisition / (18,500.00)
Decrease in NCI (48,500.00)

(8/ x ½ = 4 marks)

c) Prepare the consolidated statement of profit or loss and other comprehensive income for the
year ended 31 December 2017.

KUPANG BHD
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017

Group
RM' 000
Revenue (355.5+200.5) / +(105*9/12) / -10 / -7 / 617,750.00
Cost of Sales (210+112.5)/ +(70.5*9/12) / -10 / +1.2 // -7 / +0.375 // (359,950.00)
Gross profit 257,800.00
Loss on sale of assets 1-1 -
Investment income 6.225 / - 6.225 / (0.75*0.07*120*3/4) -1.5 (0.00)
Admin expenses (31.5+29.5) / +(19.5*9/12) / +0.1 / (under depn) (75,725.00)
Selling expenses (26.5+15.7) / +(18*9/12)/ (55,700.00)
Impairment of goodwill / (3,000.00)
Bargain purchase / 1,875.00
Share of profit from associate 6/12*11000*0.3 // 1,650.00
Impairment of intangibles 3/5 // (600.00)
-
Profit from operations 126,300.00
(5.5+6.3)/ + (7.5*9/12) / -(0.75*0.07*120*3/4) / +
Finance cost (13,225.00)
(0.25*0.07*120*1/4)//
Profit before taxation 113,075.00
Taxation (15.9+7.5)/ (23,400.00)
Profit for the year 89,675.00

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FAR610 – JAN 2018

Profit for the year attributable to /


Equity holders of the company 88,225.00
NCI W1 1,450.00
89,675.00

W1 - SHARE OF PROFIT TO NCI 1/1/16 1/4/17


Mentarang Lokan TOTAL
0.90 0.60
Profit for the year (Post acquisition) 28,000.00 (7,875.00)/ (10.5*9/12)
URP inventory (1,200.00)/
URL Machine 1,000.00/
Under depn Machine (100.00)/
Interest expense (last Q) (2,100.00)/
Amortisation licence (600.00)/
25,000.00 (7,875.00)
PS dividend paid (3,000.00)/ (1,500.00)/
22,000.00 (9,375.00)
NCI's interest 0.10 / 0.40/
2,200.00 (3,750.00)
NCI received PS dividend 3,000.00 -
PAT attributable to NCI 5,200.00 (3,750.00) 1,450.00

(42/ x ½ = 21 marks)

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FAR610 – JAN 2018

d) Prepare the consolidated statement of changes in equity for the year ended 31 December
2017.

KUPANG BHD

FOR THE YEAR ENDED 31 DECEMBER 2017

GRE NCI
RM'000 RM'000
Balance brought down W1 160,605.00 132,570.00 W2
Acquisition of subsidiary / 25,000.00/ Q1A (a)
Changes in shareholding in subsidiary / 18,500.00 (48,500.00)/ Q1A (b)
Profit for the year / 88,225.00 1,450.00

OS Dividend (15,000.00)/ (800.00)/


PS Dividend (4,500.00)/ (3,000.00)/
Balance carried down 247,830.00 106,720.00
- -

W1 - GRE B/D Kupang Mentarang Total


RE b/d 157,175.00/ 55,500.00/
RE DoA (50,000.00)/
Amortisation licence - (600.00)/
157,175.00 4,900.00
Parent's interest 1.00 0.70
GRE B/d 157,175.00 3,430.00 160,605.00

W2 - NCI B/D Mentarang


Adjusted RE b/d as above 4,900.00
NCI's interest 0.30
1,470.00/
NCI interest on PSC 60,000.00/
NCI on DoA 71,100.00/
NCI B/D 132,570.00

(16/ x ½ = 8 marks)

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FAR610 – JAN 2018

e) Prepare the consolidated statement of financial position as at 31 December 2017.

KUPANG BHD
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
RM' 000
Assets
Non-Current Assets
Property, plant and equipment (450+352.5+160) / +5/ +1/ -0.1/ 968,400.00
Investments -
Intangible assets (5.5+1.5+4.5)/ +3/ -(0.6 +0.6)/ 13,300.00
Investment in associate 9 / + (6/12*11000*0.3)/ 10,650.00
Goodwill on consolidation/ 11,100.00

Current Assets
Inventories (36.5+45+30.5)/ -1.2/ -0.375/ 110,425.00
Trade receivables (22.5+38+34)/ -6/ -5.25/ 83,250.00
Bills receivables (15.5+24.5+12) 52,000.00 /
Bank (30+26.5+0.8) 57,300.00 /
Total 1,306,425.00
Equity and Liabilities
Equity
Share capital 476/ + 20/ +75/ 571,000.00
Share premium 45/ +10/ +15/ 70,000.00
Retained earnings / 247,830.00
Non-controlling interests / 106,720.00

Non-current Liabilities
Debentures 120*0.25 / 30,000.00
Bank loan (40+71) / 111,000.00

Current Liabilities
Trade payables (32.5+30+31.5)/ - 6/ -5.25/ 82,750.00
Bills payables 24.5+15.5+19.5 59,500.00 /
Accruals 4.5+3+3.8 11,300.00/
Interest payables 120*0.07*1/4*0.25 525.00/
Dividend payables 15 / +(8*0.1)/ 15,800.00
Total 1,306,425.00
(36/ x ½ = 18 Marks)
Total: 60 marks

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FAR610 – JAN 2018

QUESTION 1B

a. Swfit Bhd’s ability to appoint or remove/ the majority of the board of directors of Exora Bhd
gives it the power to determine Exora Bhd’s financial and operating policies/. Even though
its ownership is only 40% of the equity, but with the ability to direct business activities of
Exora Bhd gives Swift Bhd obtained control/ over Exora Bhd.
(3/ X 1 = 3 Marks)

b. In assessing whether Pesona has obtained control over Mark, Pesona should be considered
not only the 35% shares it owns but also its option to acquire another 20% shares (a so-
called potential voting right/) in the next 12 months. The specific terms and conditions of the
option agreement and other factors are also to be considered:
• the options are currently exercisable and there are no other required conditions
before such options can be exercised, /
• If the option is exercised, these options would increase Pesona’s ownership to a
controlling interest of over 50%, /
• In the event of the other shareholders also have potential voting rights, if all options
are exercised, whether Pesona will still own a majority. /

By considering all the above factors, Pesona concludes that with the acquisition of the 35%
shares acquired plus with the potential voting rights, it has obtained control/ of Mark.
(5/ X 1 = 5 Marks)

c. Huawy Bhd pays consideration to Abata to obtain control in MSI and Mate. Prior to the
reorganisation, each company was controlled directly/ by Abata, However, after the
reorganization exercise, although MSI and Mate are now directly owned by Huawy, all three
companies are still ultimately/ owned and controlled by Abata, i.e Abata still has direct
interest in Huawy/ and indirect interest in MSI (72%/ instead on 80%) and Mate (63%/
instead of 70%). From the perspective of Abata, there has been no change/ as a result of
the reorganization, only the changes on direct and indirect interest in respective companies.
Holding company of MSI and Mate is Huawy but ultimate holding company for MSI
and Mate is Abata.
(5/ X 1 = 5 Marks)

d. The 2 characteristics of a joint arrangement are :


 The parties are bound by a contractual arrangement in the form of contract or
document/.
 The contractual arrangement gives two or more parties joint control of the
arrangement/.
(2/ X 1 = 2 marks)

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FAR610 – JAN 2018

QUESTION 2

a. Cash proceeds from disposal of subsidiary.

Gain on disposal of subsidiary = Sales proceeds – FVNA of subsidiary – Remaining goodwill


Sales proceeds = Gain + FVNA + Remaining GW
SP = 7500/ + (43000 // // // / *0.75/) + 5250/ = 45000 OR

RM’000 RM’000
SALE PROCEEDS - cash 45,000
NCI 25% x 43000 10,750√

FVNA of Wave Bhd on disposal date


Property, plant and equipment 22,500√
Inventories 26,400√
Accounts receivable 17,300√
Bank balances 2,800√
Accounts payable (15,500)√
Tax payable (6,600)√
Interest Payable (3,900)√ (43,000)
Balance of goodwill written off (5,250)√
Gain on disposal of subsidiary 7,500√

10√ X ½ = 5 marks

b. Consolidated statement of cash flows

Consolidated statement of cash flows for the year ended 30/6/2017


RM’000 RM’000
Cash flows from operating activities
Net profit before tax 117,500√

Adjustment:
Depreciation 14,200√
Gain on disposal of subsidiary (7,500)√
Gain on disposal of land (10,300)√
Loss on disposal of investment 3,600√
Impairment on goodwill 2,000√
Impairment on associate 2,800√
Share of profits of associates (33,300)√
Impairment on development cost 3,500√
Finance cost 3,000√
95,500
Changes in working capital
Increase in inventories (55-45.5)+26.4 (35,900)√√√
Increase in accounts receivable (43-30)+17.3 (30,300)√√√
Increase in accounts payable (21.3-28)+15.5 8,800√√√
Cash generated from operations 38,100

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FAR610 – JAN 2018

Interest paid (1,100)√√


Taxes paid (14,900)√√√
Net cash inflow from operating activities 22,100

Cash flow from investing activities


Acquisition of PPE (32,100)√
Disposal of subsidiary 45,000 - 2,800 42,200√√
Dividend received from associates 8,500√√
Development cost paid (11,300)√
Proceeds from short term investment 9500 - 3600 5,900√
Acquisition of short term investment (18,500)√
Proceed from disposal of PPE 8300 + 10,300 18,600√√
Net cash inflow from investing activities 13,300

Cash flow from financing activities


Redemption of debentures (3,000)√
Dividend paid to shareholders (22,000)√√
Dividend paid to NCI (6,150)√√
Net cash inflow from financing activities (31,150)

Net increase in cash and cash equivalent 4,250


Cash and cash equivalent at the beginning 8,250√
Cash and cash equivalent at the end 12,500

40√ x ½ = 20 marks

Working

Property Plant and Equipment Trade payables


b/d 168,000 Depn 14,200 Cash 354,100 b/d 28,000
OSC 35,000 Disp 8,300 Sub 15,500 Pur 362,900
SP 43,500 Sub 22,500
Cash 32,100 c/d 233,600 c/d 21,300
278,600 278,600 390,900 390,900
- -

Investment in Associates Expenses


b/d 34,000 Dividend 8,500 Impair GW 2,000 -
Cash Impair 2,800 Depn 14,200 Ope 116,000
Profit 33,300 Impair asso 2,800 -
Cash 93,500 -
c/d 56,000 Impair IA 3,500
67,300 67,300 116,000 116,000
- -

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FAR610 – JAN 2018

Intangible assets Retained earning


b/d 24,000 Amotise 3,500 b/d 93,200
Cash 11,300 Dividend 24,800 PAT 71,600

c/d 31,800 c/d 140,000


35,300 35,300 164,800 164,800
- -

Goodwill NCI
b/d 26,250 Impair 2,000 Dividend 6,150 b/d 18,500
Sub 5,250 Disp Sub 10,750 PAT 19,400

c/d 19,000 c/d 21,000


26,250 26,250 37,900 37,900
- -
Inventories 10% Debentures
b/d 45,500 b/d 26,000
COS 327,000 Cash 3,000 Cash -
Pur 362,900 Sub 26,400

c/d 55,000 c/d 23,000


408,400 408,400 26,000 26,000
- -
Trade receivables Tax payable / DT
b/d 30,000 Cash 485,700 b/d - TP 14,000
Sub 17,300 Cash 14,900 B/d - DT 12,500
Sales 516,000 Sub 6,600 SOCI 26,500
c/d - DT 19,000
c/d 43,000 c/d - TP 12,500
546,000 546,000 53,000 53,000
- -
Share capital Dividend payable
b/d 135,000 b/d 17,800
PPE 35,000 Cash 22,000 RE 24,800
- Sub -

c/d 170,000 c/d 20,600


170,000 170,000 42,600 42,600
- -

Share premium Interest payable


b/d 2,000 b/d 6,500
PPE 43,500 Cash 1,100 RE 3,000
- Sub 3,900

c/d 45,500 c/d 4,500


45,500 45,500 9,500 9,500
- -

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FAR610 – JAN 2018

Inventories (Indirect method) Trade payables (Indirect method)


b/d 45,500 Cash b/d 28,000
Sub 15,500
Sub 26,400
Inc 35,900 Dec - Dec - Inc 8,800
c/d 55,000 c/d 21,300
81,400 81,400 36,800 36,800
- -
Trade receivables (indirect method)
b/d 30,000 Cash
Sub 17,300

Inc 30,300 Dec -


c/d 43,000
60,300 60,300
-

Short term investment


b/d 17,500 Disposal 9,500

Bank 18,500
c/d 26,500
36,000 36.000
-

END OF SOLUTION

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