AC/JUNE 2008/FAR 450/FAC 450

FAR 450 JUNE 2008 SUGGESTED SOLUTION

Solution 1(a)
i.

ii.

In the year 2006, Canopy is the associate company of Pink butterfly. After second
acquisition in the year of 2007, canopy Bhd becomes a subsidiary to Pink
butterfly bhd.
Calculation of Goodwill:

Goodwill Calculation
RM000
Cost of Investment
Less: FV of S in the net assets on
the date of acq.
Ordinary shares
Share premium
Retained profit b/f
ARR
Profit for the year (3/12 x
2,300)

RM000

2nd
acquisition
RM000
10,000,

4,000/

x 25%/
Goodwill (positive)

1st
acquisition
RM000
5,000

1,000
4,000

8000
2,000
4,000/
1,000/
575/
15,575
x 50%/

7,788
2,212

/ = 8/2 = 3 marks
Accounting treatment of goodwill (FRS 3):
Goodwill is recognized as an asset and initially measure it at cost.
Subsequently it is to be tested for impairment annually. /
If goodwill is negative, reaccess the COI and FV of NA of subsidiary
before crediting it to CIS.
2 marks
iii. Year 2007, In the CBS, Pink Butterfly Bhd will consolidate its assets and
liabilities with Canopy Bhd using acquisition method. MI will be disclosed
separately. In the CIS, the results of Canopy Bhd will be consolidated from
1 April 2007. //
Year 2006 Canopy will be consolidated using the equity method as it is
an associate. /
/ = 1 x 3 = 3 marks

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AC/JUNE 2008/FAR450/FAC450

iv. Minority shareholders interest in the subsidiary will be disclosed in the

CIS as follows:PAT
Less:Pref.dividend

2,300,000/
160,000/ x 9/12/ x 100%/ =
2,140,000 x 9/12/ x 25%/
=

120,000
401,250
521,250
======

/ = 6/3 = 3 marks
b.
i.

ii.

After the disposal, Bakery has become an associate company to Pink

Butterfly.
1 mark
CBS will not include the net assets of Bakery. Investment account will be
accounted for on an equity basis. //
In CIS, the resuts of Bakery will be consolidated till the date of disposal of
the shares. For the period subsequent to the disposal, use equity
method. //
/= 4 x 1 mark = 4 marks

iii.
Calculation of gain/loss on disposal
RM
Pink Butterfly Bhd:
Sales Proceed
Less: carrying value of investment sold
Gain on disposal
Group Bhd:
Sales Proceed
Less : NA at disposal date
gain on disposal

//15,000,000 x 60%

21,000 x [60% x 75%]//

12,000,000
(9,000,000)
3,000,000
12,000,000
9,450,000
2,250,000
=======

/ = 4 x 1 mark = 4 mark
iv.

Situations where control is present even though Pink Butterfly holds less
than one half is when the parent has:
1.
power over more than one half of the voting rights by virtue of
an agreement with other investors.
2.
power to govern the financial and operating policies of the
company under statute or an agreement

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3.
4.

AC/JUNE 2008/FAR450/FAC450

power to appoint or remove the majority of the members of the

board of directors or equivalent governing body
power to cast the majority of votes at meeting of the board of
directors or equivalent governing body.
Any 2 x 1 mark each = 2 marks

c.
i.
ii.

iii.

Functional currency is the currency of the primary economic environment

in which the entity operates. /
1 mark
Functional currency of :
Spa Bhd = RM/
Resort Bhd = R$/
1 mark each x 2 = 2 marks
The most appropriate method to translate the financial statement of:
Spa Bhd : Foreign currency to functional currency
- The operations of Spa Bhd are carried out as an extension of the
parent. //
Resort Bhd : Functional currency to presentation currency
- Resort Bhd is independent of the parent. It operation are financed mainly
from its own operations rather than by the parent. //
2 marks each x 2 = 4 marks
Total : 30 marks

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AC/JUNE 2008/FAR450/FAC450

QUESTION 2
Suggested Solution
Majalah Bhd
OS 60%
OS 30%

Jelita Bhd

Midi Bhd (Joint Venture)

OS 25%

OS 60%
Wanita Bhd

Computation of goodwill on Joint Venture:

Cost of Investment
Less: OS
400,000
P&L
50,000
--------450,000 x 25%

200,000

112,500
---------87,500

Cost of Control
Jelita
Wanita
(60%)RM (66%)RM
Investment
Jelita:
OSC

in

Investment
Wanita:
OSC - Direct

in

Jelita
(60%)RM
OSC (750,000 + 75,000) x 495,000//
60%)

Wanita
(66%)RM

600,000/

OSC-Indirect
( 550,000 x 60%)
Capital
reserve/
(75,000 x 60%)

330,000/
46,200/

OSC ( 500,000 x 66%)

P & L ( 70,000 x 66%)
250,000/

33,000/

General reserve (50,000 x

66%)

330,000//
45,000
645,000

Goodwill on consolidation
580,000

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150,000

170,800

645,000

580,000

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CIS
85,400
CBS
85,400

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AC/JUNE 2008/FAR450/FAC450

Minority Interest
Jelita
(40%)RM
Investment
in
Wanita
OSC Indirect
(550,000 x 40%)
To CBS

Wanita
(34%)RM
220,000//

500,160

79880

OSC ( 750,000
75,000) x 50%
Profit & Loss

General reserve

Jelita
(40%)RM
330,000//
160,160/
10,000/

170,000/
51,000/

OSC ( 500,000 x 34%)

Share
premium
(150,000 x 34%)
Profit and loss
500,160

COC
Ord. div. payable
( 750,000 x 6% x 72%
CPL (420,000 + 2,000
+10,800 32,400) x
60%
MI (420,000 + 2,000
+10,800 32,400) x
40%
COC ( 70,000 x 66%)
Ord. div. payable
(500,000 x 5% x 72%)
CPL (250,000 -70,000
-18,000) x 66%
MI (250,000 -18,000)
x34%

300,050

500,160

Profit and loss

Jelita
Wanita
(60%)RM
(66%)RM
Bal b/d
Over depn.
32,400/
240,240

ODR from Wanita

(18,000 x 60%)

Wanita
(34%)RM

Jelita
(60%)RM
420,000
2,000/

78,880
299,880

Wanita
(66%)RM
250,000

10,800/

160,160
46,200/
18,000/
106,920
78,880
432,800

250,000

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432,800

250,000

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AC/JUNE 2008/FAR450/FAC450

CPL
Ord. div. payable (1,300,000 x
10% x 72%)
Unrealised profit P/M
Unreal.profit inventory -Jelita
Unreal.profit

inventory
-Wanita
g/w
To CBS

RM
93,600/

Balance b/d

RM
400,000

10,000/
7,000/
4,000/

ODR from Jelita (32,400 x 60%)

ODR from Wanita (18,000 x 30%))

19,440/
5,400/

P & L from Jelita/

P & L from Wanita/

240,240
106,920

85,400
572,000

772,000

OS Bonus issue
COC
CGR
(100,000
75,000) x 60%
MI (25,000 x 40%)

772,000

General Reserve
Jelita
Wanita
(60%)RM
(66%)RM
Balance b/d
75,000/

15,000/

Jelita
(60%)RM
100,000

Wanita
(66%)RM
150,000

100,000

150,000

10,000
33,000/
66,000/

COC (50,000 x 66%)

CGR
(150,000

50,000) x 66%
MI (150,000 x 34%)
100,000

51,000
150,000

CGR
RM
Balance b/d
From Jelita
From Wanita/
146,000

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RM
65,000
65,000
66,000
146,000

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AC/JUNE 2008/FAR450/FAC450

Majalah Bhd and its subsidiaries

Consolidated Balance Sheet as at 31 December 2007
RM
Issued Share Capital:
Ordinary shares of RM1 each (H)
Reserves:
Retained Profits (572,000 + (150,000-50,000) x 25%/
Consolidated General reserves
Capital Reserves

RM
1,300,000/
597,000

146,000
45,000/
2,088,000
580,040

Minority Interest
Long term liabilities
10% Debenture

200,000/
2,868,040

Current Liabilities:
Acc Payables (40,000 + 30,000 + 50,000 12,000) + (44,000 x 119,000///
25%)
Bills Payable (15,000 + 22,000 + 24,000 2,000 2,000)
57,000//
Ordinary dividend payable by Majalah to members
93,600/
Ordinary dividend payable by Jelita to Mi
12,960/
Ordinary dividend payable by Wanita to Mi
1,800/
Non-current Assets:
Goodwill on consolidation (150,000 + 85,400 )/ + 87,500/
Land & Building (1320,000 ) + (450,000 x 25%)
Plant & Machinery ( 600,000 + 286,000 + 268,000 10,000 +
2,000) + (100,000 x 25%)

284,360
3,152,400
322,900
1,432,500//
1,171,000///
2,926,400

Current Assets:
Inventories (40,000 + 35,000 + 20,000 11,000) + + (15,000 x
25%)
Good in transit
Acc Receivables (50,000 + 25,000 + 20,000 12,000 5,000) +
(27,000 x 25%)
Bills Receivable (5,000 + 6,000 + 3,000 2,000 2,000)
Bank (25,000 + 10,000 + 3,000) + (2,000 x 25%)

87,750//
5,000/
84,750//
10,000//
38,500//

226,000
3,152,400

/ = 66/2 = 33 marks

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AC/JUNE 2008/FAR450/FAC450

QUESTION 3
NAZA BHD
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
31 DECEMBER 2007
RM000
Cash flow from operating activities:
Profit before tax
Adjustments on non-cash items:
Share of profit of associate
Depreciation
Gain on disposal of subsidiary (5,200- 3,750)
Gain on disposal of PPM
Changes in working capital:
Inventory (decrease)
Trade receivable (decrease)
Trade payable (decrease)
Cash generated from operation
Tax paid
Net cash inflow from operating activities
Cash flow from Investing activities:
Dividend received from associate
Acquisition of Subsidiary
Disposal of subsidiary
Purchase of PPM
Disposal of PPM
Net cash outflow from operating activities
Cash flow from financing activities:
Dividend paid to members
Dividend paid to minority interest
Proceeds from issue of shares
Net cash from financing activities
Net cash & cash equivalents during the year/
Add: Cash and cash equivalent at 1/1/2007/
Cash and cash equivalent at 31/12/2007/

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RM000

6,500/
(500) /
700/
(1,450) //
(400)/
4,850
800 //
400//
(300) //
5,750
(800) /
4,950
100///
(100) //
4,600//
(7,680) ////
2,000/
(1,080)
(800) /
(770) ///
1,400/
(170)
3,700
400
4,100

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AC/JUNE 2008/FAR450/FAC450

Notes to the accounts:

1.

Cash and Cash equivalent:

Bank

31/12/2007
RM
4,100,000

1/1/2007
RM
400,000

2. Acquisition of subsidiary
During the year, Naza Bhd acquired Datsun Bhd. The fair values of assets and
liabilities were as follows:
Property, plant & equipment
Inventory
Trade Receivable
Bank
Trade Payable
Minority interest
Net assets acquired
Goodwill on consolidation
Total purchase consideration

RM000
2,000
600
500
700
(300)
3,500
(700)
2,800
2,800

3. Disposal of subsidiary
During the year, Naza Bhd disposed off Proton Bhd. The fair values of assets
and liabilities acquired were as follows:
Property, plant & equipment
Inventory
Trade Receivable
Bank
Trade Payable
Minority interest
Net assets disposed off
Gain on disposal
Total

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RM000
4,000
400
200
600
(200)
5,000
(1,250)
3,750
1,450
5,200

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10

AC/JUNE 2008/FAR450/FAC450

Workings:
Balance b/d
Acq. sub

Inventory
RM000
2,400
Disposal sub.
600/
Bank
Balance c/d
3,000

RM000
400/
800
1,800
3,000

Balance b/d
Acq. sub

Trade Receivable
RM000
1,500
Disposal sub.
500/
Bank
Balance c/d
2,000

RM000
200/
400
1,400
2,000

Disposal sub
Bank
Balance c/d

Disposal sub
Bank
Balance c/d

Bank
Balance c/d

Trade Payable
RM000
200/
Balance b/d
300
Acq. sub
400
900
Tax Payable
RM000
Balance b/d
800
CIS
1,200
Acq. sub
2,000

Dividend Payable
RM000
Balance b/d
800
CIS
1,000
1,800

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RM000
600
300/
900
RM000
1,000
1,000/
2,000

RM000
800
1,000/
1,800

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Balance b/d
Acq. sub
Bank

Balance b/d
Share of profit

Disposal sub.
Dividend paid
Balance c/d

11

AC/JUNE 2008/FAR450/FAC450

Property, plant & machinery

RM000
10,500
Depreciation
2,000/
Disposal sub
7,680
Disposal asset
Balance c/d
20,180

RM000
700/
4,000/
1,600/
13,880
20,180

Investment in associate
RM000
1,600
Tax
500/
Dividend received
Balance c/d
2,100

Minority interest
RM000
1,250/
Balance b/d
770
Acq.sub
1,600
CIS
3,620

RM000
100/
100/
1,900
2,100

RM000
2,400
700/
520/
3,620

( / = 34/2 = 17 marks)
Notes
3 marks
Total
= 20 marks

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AC/JUNE 2008/FAR450/FAC450

QUESTION 4
Sweet

1.1.07
30%

65%
48%

Hot
Sour
D=A
80%

1.10.06

MI: Sour 45%

MI: Spicy 52%
9/12

Spicy
900
Turnover
2,000 + 1,800 + (1,200 x 9/12) 400 = 4,300
225
COS
400 + 350 + (300 x 9/12) 400 + UKP..40. = (615)
GP
3,685
Inc
215
3,900
135
Oper. exp. 400 + 250 + (180 x 9/12) overpro. dep. 1 = (784)

440 x 6/12 x 30%

150
Tax 390 + 300 + (200 x 9/12)

MI :-

3,116
66
(840)
2,342

Sour :- 915 + 1 - UKP 40 x 40% = 350.4

Spicy:- 520 x 9/12 x 52% = 202.8

Parent

1,788.8
2,342 .
9 marks

Ket b/f S :
Sour
Spicy

120
90 x 60% = 54
-

- Div pd

1,788.8
(20) .

Ket c/f

1,942.8

fn yr

2 marks
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Ket c/f
Sweet
- UKP

13

AC/JUNE 2008/FAR450/FAC450

1,129
(10)
1,119

Sour 990
+ + - 40

x 60% = 570.6

Spicy 590 - 70 x 9/12 x 48%

= 18,702
Hot 440 x 6/12 x 30% = 66
.
1,942.8
6 marks

END OF SOLUTION

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