(30 MARKS) QUESTION 2 On 1 April 2018, Cincin Bhd acquired 60% of the equity share capital of Gelang Bhd in a share exchange of two shares in Cincin Bhd for three shares in Gelang Bhd. The issue of shares has not yet been recorded by Cincin Bhd. At the date of acquisition, shares in Cincin Bhd had a market value of RM6 each. Below are the summarised drafts financial statements of both companies. Statement of Profit or Loss for the year ended 30 September 2018 Cincin Bhd Gelang Bhd RM'000 RM'000 42,000 (32,000) 10,000 (2,000) (3,200) (400) 4,400 (1,400) 3,000 85,000 (63,000) 22,000 (2,000) (6,000) (300) 13,700 (4,700) 9,000 Sales Less Cost of Sales Gross Profit Selling Expenses Administrative Expenses Finance Cost Profit Before Tax ation Profit After Tax Statements of Financial Position as at 30 September 2018 Gelang Bhd RM'000 12,600 6,600 19,200 Cincin Bhd RM'000 Property, plant and equipment Current Assets 40,600 16,000 56,600 Total Assets Equity and Liabilities Equity shares of RM1.00 each Retained earnings 10,000 35,400 4,000 6,500 4,000 4,700 19,200 3,000 8,200 56,600 10% loan notes Current liabilities Total equity and liabilities The following information is relevant: 1) At the date of acquisition, the fair values of Gelang Bhd's assets were equal to their carrying amounts except for plant, which had a RM2 million in excess of its carrying amount. It had the remaining life of five years at that date. Straight-line depreciation is adopted for the asset. Gelang Bhd had not adjusted the carrying amount of plant as a result of the fair value exercise. Sales from Gelang Bhd to Cincin Bhd in the post-acquisition period were RM8 million. Gelang Bhd made a mark-up on cost of 40% on these sales. Cincin Bhd had sold RM5.2 million (at cost to Cincin Bhd) of these goods by 30 September 2018 2) 3) Gelang Bhd's trade receivable at 30 September 2018 include RM600,000 due from Cincin Bhd which do not agree with Cincin Bhd corresponding trade payable. This was due to cash in transit of RM200,000 from Cincin Bhd to Gelang Bhd. Both companies have positive bank balances. 4) Cincin Bhd has a policy of accounting any non-controlling interest at full fair value. The fair value of the non-controlling interest in Gelang Bhd at the date of acquisition was estimated to be RM5.9 million. Consolidated goodwill was not impaired at 30 September 2018 5) Other than where indicated, profit or loss is deemed to accrue evenly throughout the year. Required: a) Prepare the Consolidated Statements of Profit or Loss for Cincin Bhd for the year ended 30 September 2018. [CLO3:PLO6:C3](13 marks) b) Prepare the Consolidated Statement of Financial Position for Cincin Bhd and its subsidiary as at 30 September 2018 [CLO3:PLO6:C3](17 marks) (30 MARKS) QUESTION 2 On 1 April 2018, Cincin Bhd acquired 60% of the equity share capital of Gelang Bhd in a share exchange of two shares in Cincin Bhd for three shares in Gelang Bhd. The issue of shares has not yet been recorded by Cincin Bhd. At the date of acquisition, shares in Cincin Bhd had a market value of RM6 each. Below are the summarised drafts financial statements of both companies. Statement of Profit or Loss for the year ended 30 September 2018 Cincin Bhd Gelang Bhd RM'000 RM'000 42,000 (32,000) 10,000 (2,000) (3,200) (400) 4,400 (1,400) 3,000 85,000 (63,000) 22,000 (2,000) (6,000) (300) 13,700 (4,700) 9,000 Sales Less Cost of Sales Gross Profit Selling Expenses Administrative Expenses Finance Cost Profit Before Tax ation Profit After Tax Statements of Financial Position as at 30 September 2018 Gelang Bhd RM'000 12,600 6,600 19,200 Cincin Bhd RM'000 Property, plant and equipment Current Assets 40,600 16,000 56,600 Total Assets Equity and Liabilities Equity shares of RM1.00 each Retained earnings 10,000 35,400 4,000 6,500 4,000 4,700 19,200 3,000 8,200 56,600 10% loan notes Current liabilities Total equity and liabilities The following information is relevant: 1) At the date of acquisition, the fair values of Gelang Bhd's assets were equal to their carrying amounts except for plant, which had a RM2 million in excess of its carrying amount. It had the remaining life of five years at that date. Straight-line depreciation is adopted for the asset. Gelang Bhd had not adjusted the carrying amount of plant as a result of the fair value exercise. Sales from Gelang Bhd to Cincin Bhd in the post-acquisition period were RM8 million. Gelang Bhd made a mark-up on cost of 40% on these sales. Cincin Bhd had sold RM5.2 million (at cost to Cincin Bhd) of these goods by 30 September 2018 2) 3) Gelang Bhd's trade receivable at 30 September 2018 include RM600,000 due from Cincin Bhd which do not agree with Cincin Bhd corresponding trade payable. This was due to cash in transit of RM200,000 from Cincin Bhd to Gelang Bhd. Both companies have positive bank balances. 4) Cincin Bhd has a policy of accounting any non-controlling interest at full fair value. The fair value of the non-controlling interest in Gelang Bhd at the date of acquisition was estimated to be RM5.9 million. Consolidated goodwill was not impaired at 30 September 2018 5) Other than where indicated, profit or loss is deemed to accrue evenly throughout the year. Required: a) Prepare the Consolidated Statements of Profit or Loss for Cincin Bhd for the year ended 30 September 2018. [CLO3:PLO6:C3](13 marks) b) Prepare the Consolidated Statement of Financial Position for Cincin Bhd and its subsidiary as at 30 September 2018 [CLO3:PLO6:C3](17 marks)