Professional Documents
Culture Documents
AC/JUN 2012/FAR450/FAC450
COURSE
COURSE CODE
FAR450/FAC450
EXAMINATION
JUNE 2012
TIME
3 HOURS
INSTRUCTIONS TO CANDIDATES
1.
2.
Answer ALL questions in the Answer Booklet. Start each answer on a new page.
3.
Do not bring any material into the examination room unless permission is given by the
invigilator.
Please check to make sure that this examination pack consists of:
i)
ii)
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
QUESTION 1
A)
The following summarised statements of financial position relate to Hazel Bhd, Dew
Bhd and Mist Bhd as at 31 December 2011:
Hazel Bhd
RM'million
370
292
62
91
7
822
Dew Bhd
RM'million
418
MistE
RM'mil
289
55
35
473
324
600
100
12
40
300
85
15
4
200
61
25
10
52
18
58
6
5
24
4
822
473
324
Hazel Bhd acquired 60% of the ordinary shares of Dew Bhd on 1 January 2008
for RM213 million, when the retained profit and other reserves of Dew Bhd stood
at RM38 million and RM4 million respectively.
Fair value measurement
conducted upon this acquisition exercise reveal that the fair value of land was
RM8 million more than its carrying amount. This fair value has not changed
since 1 January 2008. Dew Bhd uses the cost model to value its non current
assets.
On 1 January 2011, Hazel Bhd acquired another 20% of the ordinary shares of
Dew Bhd for RM79 million, when the retained profit and other reserves were
RM85 million and RM4 million respectively.
2.
Hazel Bhd has been able to exercise significant influence over Mist Bhd starting
from 1 January 2009 when it acquired 30% of the ordinary shares of Mist Bhd for
RM62 million. On that date, the retained profit and other reserves were RM3
million and RM7 million respectively. On 1 January 2009, the fair value of one of
Mist Bhd's building was RM4 million more than the carrying value. Its remaining
useful life was 10 years. Mist Bhd uses cost model to value its non-current
assets.
3.
On 1 April 2011, Hazel Bhd sold a machine with a book value of RM12 million to
Dew Bhd for RM17 million. The remaining useful life of the machine is 10 years.
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
4.
Hazel Bhd, Dew Bhd and Mist Bhd have proposed the final ordinary dividend
before the year end. Hazel Bhd has yet to recognize its share of dividend from its
investees.
5.
On 29 December 2011, Dew Bhd sent a cheque to Hazel Bhd of RM2 million.
This was not received by Hazel Bhd until 5 January 2012.
6.
7.
8.
Required:
B)
a.
Compute the goodwill/gain on bargain purchase upon the acquisition of Dew Bhd
and Mist Bhd.
(6 marks)
b.
In 2012, Hazel Bhd diversified its activities and expanded its operations through the
acquisition of the following investments:
i)
CONFIDENTIAL
CONFIDENTIAL
ii)
AC/JUN 2012/FAR450/FAC450
Required:
With reference to FRS 127 Consolidated and Separate Financial Statements, discuss
the presence of control in Rainbow Bhd and Cashew Bhd and the impact on group
financial reporting.
(6 marks)
(Total: 34 marks)
QUESTION 2
The following are the draft statements of comprehensive income of Matahari Bhd, Kenanga
Bhd, Melati Bhd and Chempaka Bhd for the year ended 31 December 2011.
Matahari
Bhd
RM'million
Kenanga
Bhd
RM'million
Melati
Bhd
RM'million
Chempaka
Bhd
RM'million
Turnover
Cost of sales
120
65
40
30
(50)
(25)
(20)
(15)
70
40
Expenses
(20)
(10)
30
0.2
3.75
33.95
(8.95)
20
(9)
11
15
(6)
9
11
(3.3)
25
7.7
(2.52)
6.48
15
9
5
1
50
Gain on sale of machine
Dividends from subsidiary
Profit before taxation
Taxation
Profit after taxation
Retained profit on 1 January 2011
Ordinary dividends paid
Preference dividends paid
10
60
(16.8)
43.2
32
12
5
11.5
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
Additional information:
1.
Ordinary shares
Share premium
10% Preference shares
Matahari
Bhd
RM'million
Kenanga
Bhd
RM'million
Melati
Bhd
RM'million
Chempaka
Bhd
RM'million
60
24
50
50
10
40
30
20
10
All the companies have not issued any new shares since 2009.
2.
On 1 January 2010, Matahari Bhd acquired 80% of the issued ordinary shares of
Kenanga Bhd when the retained profit and share premium of Kenanga Bhd were
RM12 million and RM10 million respectively. Matahari Bhd also acquired 20% of the
RM40 milion 10% preferences shares of RM1 each of Kenanga Bhd. On 1 January
2010, the fair value of the plant of Kenanga Bhd was RM10 million and its carrying
value was RM7 million. The remaining useful life of the plant is six years. Kenanga
Bhd did not incorporate the fair value in its account.
The group recognizes partial goodwill which was RM200,000. As at 31 December
2011, the goodwill was impaired by 20% and there was no impairment in the previous
year.
3.
On 1 January 2011, Matahari Bhd acquired one-third (1/3) interest in Chempaka Bhd
when the retained profit of Chempaka Bhd was RM6 million. Matahari Bhd has joint
control over Chempaka Bhd.
4.
On 1 July 2011, Kenanga Bhd acquired 75% of the issued ordinary shares of Melati
Bhd. The bargain purchase arising from the acquisition was RM100,000.
5.
Kenanga Bhd sold a machine to Melati Bhd on 1 October 2011 making a profit of
RM200.000. The remaining useful life of the machine is 5 years and the group
depreciates its machine on a straight-line basis, providing a full year depreciation in
the year of purchase and none in the year of disposal.
6.
During the year, Chempaka Bhd sold inventories costing RM2.7 million for RM3 million
to Matahari Bhd. Matahari Bhd has not sold any of these inventories.
7.
8.
All profits and losses are deemed to accrue evenly throughout the year.
9.
Matahari Bhd accounts for its joint venture using the proportionate consolidation
method.
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
Required:
a.
Prepare the consolidated statement of comprehensive income for the year ended 31
December 2011.
(17 marks)
b.
Prepare the consolidated statement of changes in equity (extract) for the year ended
31 December 2011, showing the group retained profit and non-controlling interest.
(8 marks)
c.
Explain how the gain on sale of machine will be treated in the consolidated statement
of comprehensive income for the year ended 31 December 2011, if Kenanga Bhd sold
the machine to Melati Bhd on 1 April 2011.
(2 marks)
d.
State the other method of accounting for an investment in jointly controlled entities
allowed under FRS 131 Interests in Joint Ventures other than the method employed by
Matahari Bhd. Explain how this method is applied in the consolidated statement of
comprehensive income
(3 marks)
(Total: 30 marks)
QUESTION 3
The summarized consolidated financial statements of Budiman Bhd for the year ended 31
December 2011 are as follows:
Consolidated Statement of Comprehensive Income for the year ended
31 December 2011
Turnover
Cost of sales
Trading profit
Dividend from other investments
Administrative expenses
Sales and distribution cost
Finance cost
Share of profits from associate
Profit before taxation
Taxation
Profit after taxation
Profit after tax attributable to:
Equity holders of Budiman Bhd
Non controlling interest
RM' million
565
(226)
339
7.54
(162.99)
(94.5)
(1.5)
1.25
88.8
(2.8)
86
64
22
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
RM' million
149.5
64
(13.5)
200
31 December 2011
RM'million
972.5
69
47.28
26.67
80
26.5
22.25
38
5.05
1.287.25
Financed by:
Ordinary shares of RM1 each
Share premium
General reserve
Retained profit
Non controlling interest
6% Debentures
Accounts payable
Bank overdraft
Tax payable
31 December 2010
RM'million
714.9
30
26.5
10
21
32
7.5
841.9
450
33
150
149.5
50
650
83
150
200
157
25
9.7
10
2.55
1.287.25
2.9
5
1.5
841.9
Additional information:
1.
2.
On 1 March 2011, Budiman Bhd acquired 60% equity shares in Selesa Bhd. The fair
value of the net assets of Selesa Bhd on that date was as follows:
RM' million
200
3.35
2.9
0.25
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
RM' million
130
25
The non controlling interest is measured at fair value and it was valued at RM90 million
on the date of acquisition.
3.
Other investments purchased during the year were RM70 million loan stock dated
2016 and a loan note which is repayable on demand.
Required:
Prepare the Consolidated Statement of Cash Flow using the indirect method for Budiman
Bhd for the year ended 31 December 2011. (Show only the notes on cash and cash
equivalent)
(19 marks)
QUESTION 4
On 1 January 2010, Orchid Bhd acquired 2.8 million of the 4 million issued ordinary shares
of Daisy Bhd. The nominal value of the ordinary shares of Daisy Bhd was RM2.00 per share.
The purchase consideration was through an issuance of 2 million ordinary shares of Orchid
Bhd at RM3.90 per share. On that date, the carrying value of the net assets of Daisy Bhd
reflected the fair value, except for a piece of land that was RM100,000 more than its book
value. The reserves of Daisy Bhd on 1 January 2010 were as follows:
Retained profit
Share premium
RM2.2 million
RM300,000
Goodwill was impaired by RM100,000 on 31 December 2010 and there was no further
impairment since then.
On 31 May 2011, Orchid Bhd sold 1.68 million of its shares in Daisy Bhd for RM5.88 million.
On that date, the remaining shares in Daisy Bhd had a fair value of RM3.30 per share. On
that date, the share premium of Daisy Bhd was RM300.000. Its retained profit on 1 January
2011 and 31 December 2011 stood at RM3.3 million and RM4.5 million respectively. All
profits are deemed to accrue evenly throughout the year.
Non controlling interest is measured in proportion to the fair value of net assets of Daisy
Bhd.
CONFIDENTIAL
CONFIDENTIAL
AC/JUN 2012/FAR450/FAC450
Required:
a.
Calculate the gain or loss on disposal of the shares in Daisy Bhd, for the group and for
Orchid Bhd.
(10 marks)
b.
How would Orchid Bhd account for its investment in Daisy Bhd in the group statement
of financial position as at 31 December 2011? Show the detail composition of Orchid
Bhd's interest in Daisy Bhd as would appear in the group statement of financial
position as at 31 December 2011.
(5 marks)
c.
Explain how the result of the operation of Daisy Bhd would be included in the group
statement of comprehensive income for the year ended 31 December 2011.
(2 marks)
(Total: 17 marks)
CONFIDENTIAL