UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY AND MANAGEMENT

ACADEMIC YEAR 2019/2020
BACHELOR OF ACCOUNTING (HONOURS)
TUTORIAL 4
Basic Consolidation – Revision questions

Q1. P Bhd, a process control equipment and measurement instruments distributor has
investment in three companies. The summarized Statements of Comprehensive
Income for P Bhd and three other companies are as follow:-

Statement of Comprehensive Income for the year ended 30 June 2016

P Bhd S Bhd AC Bhd JV Bhd

RM’000 RM’000 RM’000 RM’000
Sales 800 700 600 500
Cost of sales (100) (120) (130) (80)
Gross Profit 700 580 470 420
Administration expenses (50) (30) (20) (30)
Marketing expenses (34) (85) (50) (30)
Management paid to S Bhd (35) - (40) (20)
Dividend from JV Bhd 4 - - -
Dividend from S Bhd 4 - - -
Management fees from P Bhd - 35 - 20
Profit before tax 589 500 360 360
Taxation (120) (200) (130) (120)
Profit after tax 469 300 230 240
Other comprehensive income
Revaluation of assets 50 20 10 20
Total comprehensive income 519 320 240 260

Additional information:-

1. Several years ago P Bhd purchased 80%, 40% and 20% of ordinary shares of S
Bhd, AC Bhd and JV Bhd respectively. P Bhd has control of S Bhd and has
significant influence on JV Bhd. For AC Bhd, P Bhd has joint control with
another major shareholder of JV Bhd. P Bhd regards JV Bhd as a joint venture
under MFRS 11 Joint Arrangements.

2. During the year P Bhd sold goods to AC Bhd and JV Bhd at invoice price of
RM10,000 and RM15,000 respectively at cost plus 25%. S Bhd sold inventories
to P Bhd at selling price of RM20,000 at 20% profit margin on selling price.
All these goods or inventories are remained unsold until 30 June 2016.
3. P Bhd’s policy is to value non-controlling interest at fair value at the date of
acquisition. Goodwill on consolidation for S Bhd and AC Bhd was impaired by

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 RM16,000 and RM15,000 respectively. Impaired goodwill is charged to cost of
sales.

4. The directors of S Bhd and JV Bhd paid RM5,000 and RM20,000 dividends
respectively in June 2016.

5. All items in the above statements of comprehensive income are deemed to

accrue evenly over the year.

Required:

Prepare Consolidated Statement of Comprehensive Income for the year ended 30

June 2016.

Q2. (a) TAR Bhd group has been on an acquisition spree over the past twelve years, plans
to acquire more companies and list its shares in Bursa Malaysia.

TAR Bhd has investments in three companies, Rahman Bhd, Abdul Bhd and Putra
Bhd. A draft consolidated statement of financial position as at 31 March 2016 has
been prepared by an assistance accountant, who is first time preparing
consolidation.

An extract from the draft consolidated statement of financial position as prepared

by the assistance accountant is shown below, together with the individual statement
of financial positions:

Statements of Financial Position as at 31 March, 2016

TAR Rahman Abdul Putra

Non-current Assets RM'000 RM'000 RM'000 RM'000

Property, Plant and Equipment 1,284 856 300 500

Investments 1,500

Current Assets

Inventories 150 40 40 50

Trade Receivable 50 30 30 60

Cash and banks 44 46 46 5

3,028 972 416 615

Equity and Liabilities

Share capital 1,500 420 300 400

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 Share premium 500 160 - 50

Retained profits 548 372 96 105

2,548 952 396 555

Other liabilities 480 20 20 60

3,028 972 416 615

Details of TAR three investments are as follow:

Rahman Abdul Putra

Date of acquisition 1 April 2015 1 July 2015 1 April 2015
Percentage holding acquired 80% 40% 75%
Consideration RM820,000 RM200,000 RM480,000
Retained profit at date of RM240,000 RM67,000 RM130,000
acquisition
Non-controlling interest Proportionate N/A Fair Value
method basis basis
Impairment of goodwill in 2016 RM17,000 RM24,000 RM23,000

Additional information:

1. Abdul Bhd had an item of plant which had a fair value RM30,000 in excess of
its carrying amount. The plant had a remaining useful life of six years at 1 July
2015, the date that TAR Bhd acquired its shares in Abdul Bhd.

2. The fair value of the non-controlling interest at the date of acquisition of Putra
Bhd was RM150,000. There had been no impairments of goodwill or
investments prior to 1 April 2015.

3. At the date of acquisition the fair values of the assets, liabilities and contingent
liabilities of Rahman Bhd, Abdul Bhd and Putra Bhd were equal to their
carrying amounts, with the following exception:

Rahman Bhd has internally generated brands which were not recognised in
Rahman Bhd’s own financial statements and the interim manager did not
include them in the draft consolidated financial statements. An independent
expert valued the brands at RM150,000, with a useful life of five years, at 1
April 2015, the date of acquisition of Rahman Bhd by TAR Bhd.

4. During the year ended 31 March 2016 TAR Bhd sold goods to Abdul Bhd for
RM35,000 with a gross profit margin of 15%. At the year end Abdul Bhd still
held these goods in its inventories.

Required:

(i) Compute the goodwill for all subsidiaries and associated company.

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 (ii) Prepare the consolidated statement of financial position of TAR Bhd as at
31 March 2016.

Question 3
P Bhd acquired 80% of SK Bhd and 60% KC Bhd. The details of the acquisition are summarized
below:
SK Bhd KC Bhd
Date of acquisition 1/1/2016 30/6/2016
Share price per unit RM2.00 RM1.20
Cash consideration RM230 million RM150 million
Non-controlling interest valuation At fair value Proportion of net assets
Impairment of goodwill 10% None

The summarized draft Statements of Profit or Loss for the year ended 31 December 2016
are shown below:
P Bhd SK Bhd KC Bhd
RM'000 RM'000 RM'000
Revenue 80,000 60,000 40,000
Cost of sales (30,000) (20,000) (12,000)
Gross profit 50,000 40,000 28,000
Distribution costs (12,000) (8,000) (6,000)
Administration costs (800) (600) (1,400)
Finance costs (200) (400) (600)
Dividend income 800 - -
Profit before tax 37,800 31,000 20,000
Taxation (10,000) (6,000) (4,000)
Profit after tax 27,800 25,000 16,000
Dividend paid - (1,000) -
Retained profit 12,400 15,000 3,000
40,200 39,000 19,000

Additional information:

(1) P Bhd has one-third interest in JV Bhd as from 1 January 2016. In 2016 JV Bhd
recorded after tax profit of RM21 million. JV Bhd is classified as a joint venture and P
Bhd has joint control in JV Bhd.

(2) At the date of acquisition of KC Bhd, the fair value of the net assets of KC Bhd was
deemed to be the same as the carrying amount with one exception. A contingent
liability which could be reliably measured had a fair value of RM3 million at the date
of acquisition and a fair value of RM2 million at 31 December 2016.

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(3) Part of the purchase consideration of SK Bhd was paid by 5 million P Bhd's share at
RM1.20 each. This has not been taken up in P Bhd's books.

(4) At date of acquisition of SK Bhd, the market value of land in SK Bhd was RM30
million, but recorded at carrying amount of RM25 million in SK's books. P Bhd’s group
policy is value all properties at fair value.

(5) SK Bhd sold goods to P Bhd for RM10 million at profit of 25% on costs. One quarter
of these goods still remain in the inventory of P Bhd on 31 December 2016.

Statement of Financial Position as at 31 December 2016

P Bhd SK Bhd KC Bhd

Non-current Assets RM'000 RM'000 RM'000
Property, Plant & Equipment 50,000 100,000 120,000
Investment in Subsidiaries 380,000 - -
Investment in JV Bhd 50,000 - -
Loan to KC Bhd 200 - -

Current Assets
Inventory 30,000 50,000 10,000
Trade Receivables 60,000 80,000 16,000
Bank 30,000 40,000 4,200
600,200 270,000 150,200
Equity
Ordinary share at RM1.00 each 450,000 200,000 120,000
Retained profit 40,200 39,000 19,000

Non-current liabilities
Loan notes at 6% 50,000 - -

Current Liabilities
Trade Payables 60,000 31,000 11,000
Loan from P Bhd - - 200
600,200 270,000 150,200

Required:
(i) Calculate the goodwill arising on the acquisition of the two subsidiaries.
(ii) Prepare the Consolidated Statement of Profit or Loss for the year ended 31 December
2016.
(iii) Prepare the Consolidated Statement of Changes in Equity for the year ended 31
December 2016.
(iv) Prepare the Consolidated Statement of Financial Position as at 31 December 2016.