ACT3126 ADVANCED FINANCIAL ACCOUNTING I (SEMESTER 1 2010/2011)

QUESTION 1 (40 MARKS)

(i) Determine the amount of goodwill on acquisition.

RM’000Investment in MUFC 16,000√Less Share capital of MUFC Sdn Bhd (8,000 x 80%) 6,400√

Revaluation – Net assets (4,000 x 80%) 3,200√Retained profits brought forward (pre-acquisition) (6,000 x 80%) 4,800√ 14,400

Goodwill on acquisition 1,600√

(√ = 1 mark, Total : 5 marks)

(ii) Determine the share of non-controlling interest in the realized profit for the financial year end 2010.

Profit for the year 5,700,000√Add realization of profit on intercompany inventory brought forward 400,000√Less unrealized profit in closing inventories (300,000) √Total profit for the year 5,800,000√x 20%√ 1,160,000√

(√ = 1/2 mark, Total : 3 marks)

(iii) Show all the consolidation entries in relation to the additional information for (b).

Debit CreditSales 4,000,000√

Purchases 4,000,000√- to eliminate inter-company sales and purchases

Closing inventories in comprehensive income 300,000√√Closing inventories in financial position 300,000√√

- to eliminate unrealized profit in closing inventories

1 √ for correct positioning of debit and credit(√ = 1 mark, Total : 7 marks)

(iv)Present the consolidated financial statements of Kelate Bhd for the year ended 31 December 2010.

Kelate BhdConsolidated Statement of Comprehensive Income

For the year ended 31.12.10√

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ACT3126 ADVANCED FINANCIAL ACCOUNTING I (SEMESTER 1 2010/2011)

RM’000Revenue 36,000√Cost of sales (19,900)√Gross profit 16,100√Operating expenses (2,400)√Gain on sales of properties 4,280√Profit from operations 17,980Finance cost (440)√Profit before taxation 17,540Taxation (2,700)√Profit for the year 14,840

Kelate BhdConsolidated Statement of Financial Position

As at 31.12.10√RM’000

Non-current Assets:Property, plant and equipment 48,280√Goodwill on combination 2,000√

50,280Current Assets:Inventories 15,700√Trade receivables 14,000√Other receivables 2,560√Bank balances 6,960√

39,220TOTAL ASSETS 89,500

Share capital of RM1 each 32,000√Retained profits 22,920√Equity attributable to owners of the Kelate Bhd 55,900Non-controlling interest 5,460√TOTAL EQUITY 61,360Non-current Liabilities:Long term loans 15,000√Redeemable preference shares of RM1 each 2,000√

21,000Current Liabilities:Trade payables 6,200√Other payables 1,270√Taxation 2,650√Bills payables 2,000√

12,120TOTAL LIABILITIES 33,120TOTAL EQUITY AND LIABILITIES 94,4801 √ if there is no mention of Investment in MUFC Sdn Bhd

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ACT3126 ADVANCED FINANCIAL ACCOUNTING I (SEMESTER 1 2010/2011)

(√ = 1 mark, Total : 25 marks)

QUESTION 2 (20 MARKS)

(a)(i) Prepare the consolidated statement of financial position of Ilyas Bhd for the year ended

31 December 2010.

Ilyas BhdConsolidated Statement of Financial Position as at 31.12.10

RM’000 RM’000

Ordinary shares 500√√Consolidated profit and loss (150√ + (110√ – 30√) x 25%√) 170

670Liabilities 25√√

695

Non-current assets 515√√Investment in associate 120

635Current assets 50√Loan to associate 10√ 60

695

Investment in associate Net assets in Associate (200,000√ + 30,000√) x 25%√ 57,500Goodwill 62,500√

120,000

(√ = 1/2 mark, Total : 8 marks)

(ii) Define the term ‘significant influence’ as prescribed by FRS 128.

Significant influence is the power to participate√ in the financial and operating policy decisions of the investee but not control of those policy√.

(√ = 1 mark, Total : 2 marks)

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ACT3126 ADVANCED FINANCIAL ACCOUNTING I (SEMESTER 1 2010/2011)

(b)

(i) Present the consolidated statement of financial position of Elsa Bhd for the year ended 31 December 2010 using proportionate consolidation.

Elsa BhdConsolidated Statement of Financial Position as at 31.12.10

RM’000Ordinary shares of RM1 each 500√√Group profit (150√ + (110√ – 30√) x 25%√) 170

670Current liabilities (45√ + (30 x 25%)√) 52.5

722.5

Non-current assets (570√+ (330 x 25%)√) 652.5Goodwill (100√ – (200√ + 30√) x 25%√) 42.5Current assets (25√ + (10 x 25%)√) 27.5

722.5

(√ = 1/2 mark, Total : 8 marks)

(ii) Define the term ‘joint control’ as prescribed by FRS 131.

Joint control is the contractually agreed sharing of control√ over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent√ of the parties sharing control (the venturers).

(√ = 1 mark, Total : 2 marks)

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ACT3126 ADVANCED FINANCIAL ACCOUNTING I (SEMESTER 1 2010/2011)

Question 4 (a)

S$’000 S$’000Non-Current Assets:Land 6,000Property, Plant and Equipment (at cost) 8,680Less: Accumulated depreciation 1,140 7,540

13,540Current assets: Inventories 4,800 Monetary current assets 15,680 20,480

34,020

Ordinary share capital of S$1 each 8,000Revaluation reserve 4,800Retained profits 14,952

27,752Long term liabilities: Loan 5,000Current liabilities: Short term borrowings 1,000 - Bills payable 268 1,268

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S$’000 S$’000 Rate RM’000 RM’000Sales 20,000 2.66 53,200Cost of goods sold: Opening inventories 3,200 2.66 8,512 Purchases 13,000 2.66 34,580

16,200 43,092 Closing inventories (4,800) 2.66 (12,768)

(11,400) (30,324)Gross profit 8,600 22,876Expenses: Depreciation 680 2.66 1,809 Interest expense 370 2.66 984 Administrative expense 200 2.66 532 Other expenses 660 2.66 1,756

(1,910) (5,081)Profit before taxation 6,690 17,795Taxation (1,338) 2.66 (3,559)Profit after tax 5,352 14,236Retained profit b/f 9,600 Note 1Retained profit c/f 14,952

ACT3126 ADVANCED FINANCIAL ACCOUNTING I (SEMESTER 1 2010/2011)

34,020

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