1 On 1 April 2011, Pipi acquired 80% of Square's equity shares by means of an immediate share exchange and a cash payment of RM0.88 per acquired share, deferred until 1 April 2012. Pipi has recorded the share exchange but not the cash consideration. Pipi's cost of capital is 10% per annum. The summarized statements of financial position of the two companies as at 31 March 2012 are: Assets Non-current assets Property plant and equipment Pipi RM'000 Square RM'000 38,100 28,500 Investments Square - 24,000 Cube at cost (note iv) 6,000 - Loan note (note ii) 2,500 Other equity (note v) 2.000 Nil 72,600 28,500 Current assets Inventory (note iii) 13,900 10,400 Trade receivables (note iii) 11,400 5,500 Bank (note iii) 900 600 Total assets 98,800 45,000 Equity and liabilities Equity Equity shares of RM 1 each 25,000 10,000 Share premium 17,600 Nil Retained carnings at 1 April 2011 16,200 18,000 For year ended 31 March 2012 14,000 8.000 72,800 36,000 Non-current liabilities 11% loan (notes ii) 12,000 4,000 Deferred tax 4,500 Nil Current liabilities (note iii) 9.500 5,000 Total equity and liabilities 98,800 45.000 The following information is relevant: (i) (ii) (iii) At the date of acquisition, Pipi conducted a fair value exercise on Square's net assets which were equal to their carrying amounts with the following exceptions: An item of plant had a fair value of RM3 million above its carrying value. At the date of acquisition it had a remaining life of five years. Ignore deferred tax relating to this fair value Square had an unrecorded deferred tax liability of RM 1 million, which was unchanged as at 31 March 2012. Pipi's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose a share price for Square of RM3.50 each is representative of the fair value of the shares held by the non-controlling interest. Immediately after the acquisition, Square issued RM4 million of 11% loans, RM2.5 million of which were bought by Pipi. All interest due on the loan notes as at 31 March 2012 has been paid and received. Pipi sells goods to Square at cost plus 50%. Below is a summary of the recorded activities for the year ended 31 March 2012 and balances as at 31 March 2012: Sales to Square Purchases from Pipi Included in Pipi's receivables Included in Square's payables Pipi RM'000 Square RM'000 16,000 14,500 4,400 1,700 (iv) (v) (vi) Required: On 26 March 2012, Pipi sold and despatched goods to Square, which Square did not record until they were received on 2 April 2012. Square's inventory was counted on 3 March 2012 and does not include any goods purchased from Pipi. On 27 March 2012 Square remitted to Pipi a cash payment which was not received by Pipi until 4 April 2012. This payment accounted for the remaining difference on the current account. Pipi bought 1.5 million shares in Cube on 1 October 2011; this represents a holding of 30% of Cube's equity. At 31 March 2012, Cube's retained profits had increased by RM2 million over their value at 1 October 2011. Pipi uses equity accounting in its consolidated financial statements for its investment in Cube. The other equity investments of Pipi are carried at their fair values on 1 April 2011. At 31 march 2012, these had increased to RM2.8 million. There were no impairment losses within the group during the year ended 31 March 2012. Prepare the consolidated statement of financial position for Pipi as at 31 March 2012. (Total 25 marks)