QUESTION 1

Given below are the statements of financial position of Gold and Bronze as at

Ordinary shares of RM1 each

Share premium
General reserve
Retained profit
Liabilities

Non-current assets
Investment in 150,000 ordinary
shares of Bronze at cost
Current assets

Additional information:

a) Gold bought the ordinary shares in Bronze on 1 January x4 when t

Share premium
General reserve
Retained profit
Required:

Prepare the relevant journal entries for consolidation and prepare th

position of Gold and of its subsidiary as at 31 December x9 on the b

i) Not measured at fair value.

ii) Measured at fair value and the fair value of non-controlling interes
ANSWER

a)

% of ownership: Group [150m/200m]=75%; NCI [50m/200m]=25%

Cost of investment
Non-controlling interest [RM300,000x25%]
Net assets of Bronze on 1 January x4:
Ordinary share capital
Share premium
General reserve
Retained profit
Goodwill
Retained profit of Bronze 31 December x9
Pre-acquisition retained profit
Post-acquisition retained profit
Retained profit of Gold
General reserve of Bronze 31 December x9
Pre-acquisition general reserve
Post-acquisition retained profit
General reserve of Gold
NCI to statement of financial position
Group retained profit
Group general reserve

Journal entries

Accounts
a

Ordinary share capital of Bronze

Share premium
General reserve

200,000
40,000
50,000
10,000

Retained profit
Goodwill
Investment
NCI
(Being elimination of inv. in subsidiaries against the share
capital and reserves)
b

General reserve (Bronze)

Group general reserve
NCI
(Being allocation of Bronze general reserve to group and
NCI)

Retained profit (Bronze)

Group retained profit
NCI
(Being allocation of Bronze retained profit to group and
NCI)

b)

Cost of investment
Non-controlling interest

Net assets of Bronze on 1 January x4:

Ordinary share capital
Share premium
General reserve
Retained profit
Goodwill

200,000
40,000
50,000
10,000

Retained profit of Bronze 31 December x9

Pre-acquisition retained profit
Post-acquisition retained profit
Retained profit of Gold
General reserve of Bronze 31 December x9
Pre-acquisition general reserve
Post-acquisition retained profit
General reserve of Gold
NCI to statement of financial position
Group retained profit
Group general reserve

Journal entries
Accounts

Ordinary share capital of Bronze

Share premium
General reserve
Retained profit
Goodwill
Investment
NCI
(Being elimination of inv. in subsidiaries against the share
capital and reserves)

General reserve (Bronze)

Group general reserve

NCI
(Being allocation of Bronze general reserve to group and
NCI)
f

Retained profit (Bronze)

Group retained profit
NCI
(Being allocation
of Bronze retained profit to group and
NCI)

f Gold and Bronze as at 31 December x9.

Gold
RM
600,000
60,000
150,000
150,000
40,000
1,000,000

Bronze
RM
200,000
40,000
80,000
30,000
30,000
380,000

585,000

300,000

325,000
90,000
1,000,000

80,000
380,000

on 1 January x4 when the balances in Bronze accounts were:

RM
40,000
50,000
10,000

olidation and prepare the consolidated statement of financial

1 December x9 on the basis that non-controlling interest is:

of non-controlling interest on 1 January x4 was RM87,000.

NCI [50m/200m]=25%

NCI (25%)
RM'000
325,000
75,000

Group
retained
profit
(75%)

Group
General
Reserve
(75%)

###

300,000
100,000
30,000
(10,000)
20,000

5,000

80,000
(50,000)
30,000

7,500

15,000
150,000

22,500
150,000

12,500
165,000
172,500

Dr
RM'000
200
40
50

Cr
RM'000

Ordinary shares of
Share premium
General reserve

10
100
325
75

Retained profit

aries against the share

30,000

NCI
22,500
7,500

reserve to group and

Liabilities
20,000
15,000
5,000

Non-current assets

profit to group and

Investment in 150
shares of Bronze a
Goodwill
Current assets

NCI (25%)
RM'000
325,000
87,000

87,000

Group
retained
profit
(75%)

Group
General
Reserve
(75%)

300,000
112,000
30,000
(10,000)
20,000

5,000

80,000
(50,000)
30,000

7,500

15,000
-

22,500
150,000

99,500
15,000
172,500

Dr
RM'000
200
40
50
10
112

Cr
RM'000

Ordinary shares of
Share premium
General reserve
325
87

Retained profit

aries against the share

30,000
22,500

NCI

7,500

reserve to group and

20,000
profit to group and

Liabilities
15,000
5,000

Non-current
assets
Investment in
150
shares of Bronze a
Goodwill
Current assets

rdinary shares of RM1 each

hare premium
eneral reserve

Gold
RM
600,000
60,000
150,000

Bronze
RM
200,000
40,000
80,000

etained profit

iabilities

on-current assets

nvestment in 150,000 ordinary

hares of Bronze at cost
oodwill

urrent assets

150,000

30,000

960,000
-

350,000
###

40,000
1,960,000

30,000
730,000

585,000

300,000

325,000
90,000

###
80,000

rdinary shares of RM1 each

hare premium
eneral reserve

etained profit

Gold
RM
600,000
60,000
150,000

Bronze
RM
200,000
40,000
80,000

150,000

30,000

960,000
-

350,000
###

iabilities

on-currentin
assets
nvestment
150,000 ordinary
hares of Bronze at cost
oodwill
urrent assets

40,000
1,960,000
585,000
325,000
90,000

30,000
730,000
300,000
###
80,000

Elimination
Debit
RM
200,000
40,000
50,000

Credit
RM

Cross
Ref.
a
a
a

CSOFP
RM
600,000
60,000
172,500

30,000
22,500
10,000
20,000
15,000

b
b
a
c

165,000

75,000
7,500

a
b

5,000

997,500
87,500

1,085,000
70,000
1,155,000

325,000
100,000

885,000

a
a

100,000
170,000

450,000

450,000

1,155,000

Elimination
Debit
RM
200,000
40,000
50,000
30,000

Credit
RM

22,500
10,000
20,000
15,000
87,000

Cross
Ref.
d
d
d
e
e
d

CSOFP
RM
600,000
60,000
172,500

165,000

f
f
d

997,500
99,500

###
5,000

e
f
1,097,000
70,000
1,167,000

325,000
112,000
462,000

462,000

d
d
d

885,000
112,000
170,000
1,167,000

QUESTION 2
a)

Statements of financial position of Sing and Dance as at 31 December x4:

Ordinary shares of RM1 each

6% preference shares
Retained profit
Non-current liabilities
12% debentures
Loan from Sing
Current liabilities
Current account-Sing
Bank overdraft
Trade payables

Non-current assets
Investment at cost in Dance
720,000 ordinary shares
RM150,000 12% debentures
Research and development
Loan to Dance
Current assets
Inventories
Trade receivables
Current account-Dance
Bank

b)

Sing bought the shares and debentures in Dance on 1 January x3 when th

In order to determine the price to be paid for the shares of Dance, the ass
unrecognised brand name which had a fair value of RM100,000. Sing has
be five years.

c)

At the acquisition date, non-controlling interest had a fair value of RM122,

d)

The research and development in Dance had a carrying value of RM600,0

RM50,000 per annum. The group amortises research and development at

e)

The difference in the current accounts is due to inventories (at cost) sent

f)

Included in the trade receivables of Sing is RM20,000 due from Dance. Ho

account of this debt on 31 December x4 which was received by Sing on 1

Required:
From the information given, you are required to prepare the consolidated statement
ANSWER

Cost of investment
Non-controlling interest

Net assets of Dance on 1 January x3:

Ordinary share capital
Retained profit
Fair value adjustment (brand)
Goodwill
Retained profit of Dance 31 December x4
Pre-acquisition retained profit
Post-acquisition retained profit
Amortisation for brand
Amortisation of research & development
Retained profit of Sing 31 December x4
Group retained profit as at 31 December x4
NCI

800
300
100

Journal entries
Accounts
a

Brand
Revaluation reserve
(Fair value adjustment for brand)

Retained profit of Dance

Brand (cv)
(Amortisation adjustment)

Retained profit of Dance

Research & development (cv)
(Amortisation adjustment)

Ordinary share capital of Dance

Retained profit
Goodwill
Revaluation reserve
Investment
NCI
(Being elimination of inv. in subsidiaries against the share
capital and reserves)

Retained profit (Dance)

Group retained profit
NCI
(Being allocation of Dance retained profit to group and NCI)

12% Debenture (Dance)

Investment
(Being allocation of debentures)

Current account (Dance)

Inventory in transit
Current account (Sing)
(Being elimination of intra-group balance)

Trade payables (S)

Cash in transit
Trade receivables (Sing)
(Being elimination of intra-group balance)

Loan from Sing (Dance)

Cash in transit
Loan to Dance (Sing)
(Being elimination of intra-group balance)

Dance as at 31 December x4:

Sing
RM'000
2,000
500
-

Dance
RM'000
800
300
400
250
120

120
130
2,750

30
100
2,000

860

1,210

1,100
150
130

500
-

200
210
35
65
2,750

50
160
80
2,000

#
##
##
###
##
##
###
###
##
##

#
###
#
##
##
##
###
##
##
###
##

ance on 1 January x3 when the retained profit of Dance was RM300,000.

the shares of Dance, the assets of Dance were revalued. Dance had an
alue of RM100,000. Sing has estimated the economic life of the brand to

est had a fair value of RM122,000.

a carrying value of RM600,000 on 1 January x3. Dance amortises it at

esearch and development at 10% per annum on straight line basis.

to inventories (at cost) sent by sing to dance which is still in transit.

M20,000 due from Dance. However, Dance has remitted RM9,000 on

ch was received by Sing on 1 January x5 only.

e the consolidated statement of financial position as at 31 December x4.

NCI (10%)
RM'000
1,100
122
1,222

Group
retained
profit
(90%)

Brand (FV at 1/1/x3)=

Amortisation for year x3 & x4
(100/5* 2 years)
Group carrying value

122

Research & development

(FV at 1/1/x3) = RM600k
Amortisation for year x3 & x4
(10%xRM600k* 2 yea
Amortisation in Dance
(10%xRM500*2 years
Adjustment in retaine

1,200
22
400
(300)
100
(40)
(20)
40

126

36
500
536

Dr
RM'000
100

Cr
RM'000
100

40
40

20
20

800
300
22
100
1100
122

gainst the share

40
36
4
to group and NCI)
150
150

30
5
35

11
9
20

120
10
130

intra-group balance
Net asset & share for post-acquisition
debenture to be cancelled by investment value
investment to be cancelled & goodwill calculation

RM'000

and (FV at 1/1/x3)=

100
mortisation for year x3 & x4=
00/5* 2 years)
(40) Should reduce the retained profit
roup carrying value
60

esearch & development

V at 1/1/x3) = RM600k
mortisation for year x3 & x4=
0%xRM600k* 2 yea
120
mortisation in Dance
0%xRM500*2 years
(100)
djustment in retaine
20 Should reduce the retained profit

Elimination

Ordinary shares of RM1 each

6% preference shares
Revaluation reserve
Retained profit

Sing
RM'000
2,000
-

Dance
RM'000
800
300
###

500

400

2,500

1,500

Debit
800

100
40
20
300
40

NCI

Non-current liabilities
12% debentures
Loan from Sing
Current liabilities
Current account-Sing
Bank overdraft
Trade payables

Non-current assets

250
120

150
120

120
130
2,750

30
100
2,000

30

860

1,210

11

Investment at cost in Dance

720,000 ordinary shares
RM150,000 12% debenture
Goodwill
Brand
Research and development
Loan to Dance
Current assets
Inventories
Trade receivables
Current account-Dance
Bank

1,100
150

###

130

500
-

200
210
35
65

50
160
80

22
100

10

2,750

2,000

Elimination

Credit

Cross
Ref.
d

100

36
122
4

a
d
b
c
d
e
e
d
e

CSOFP
2,000
300
536

2,836
126
2,962

f
i

100
-

120
219
3,401

2,070
1100
150

40
20
130

20
35

d
f
d
a
b
c
i
g
h
g
h
i

22
60
480
255
350
164

3,401