Alam Berhad (Alam) acquired 75% interest in Suria Berhad (Suria) for a consideration of

RM70,000,000 on 1 January 2015 when the retained earnings of Suria was RM11,400,000.

Later, on 1 January 2016, Alam acquired 30% of interest in Permai Berhad (Permai) for a

consideration of RM31,000,000. The retained earnings of Permai on this date was

RM8,000,000. Alam treated this investment as investment in associate and accounted using a

cost method. On 1 July 2017, Alam disposed 20% of its holding in Suria for a consideration of

RM15,300,000.

The financial statements for the three companies for the financial year ended 30 June 2018 are

as follows:

Statements of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2018

Alam

RM'000

Suria

RM'000

Permai

RM'000

Revenue 37,000 28,120 27,000

Cost of sales (19,000) (16,000) (15,600)

Gross profit 18,000 12,120 11,400

Other income 4,500 - 2,500

Operating expenses (7,000) (4,840) (5,100)

Profit before taxation 15,500 7,280 8,800

Taxation (3,720) (1,747) (2,250)

Profit after taxation 11,780 5,533 6,550

Movement of Retained Profit For the year ended 30 June 2018

Alam

RM'000

Suria

RM'000

Permai

RM'000

Retained earnings b/f 17,600 16,800 11,200

Profit after taxation 11,780 5,533 6,550

Proposed dividend (7,600) (4,200) -

Retained earnings c/f 21,780 18,133 17,750

Statement of Financial Position as at 30 June 2018

Alam

RM'000

Suria

RM'000

Permai

RM'000

Investment securities 87,000 32,000 -

Other non-current assets 102,500 44,100 86,450

Current assets 30,430 22,433 28,900

219,930 98,533 115,350

Share capital, RM1 140,000 60,000 80,000

Retained earnings 21,780 18,133 17,750

Non-current liabilities 35,200 12,800 11,500

Current liabilities 22,950 7,600 6,100

219,930 98,533 115,350

Additional information:

1. Suria had acquired 25% interest in Permai on 1 March 2018 for a consideration of

RM32,000,000. This transaction has not been recorded by Alam.

2. Suria sold merchandise to Alam with a profit margin of 25% on sales. In year 2018, the

related sales were RM9,000,000 and out of that amount RM3,200,000 still remained in

the Alam's ending inventories. The corresponding intercompany sales and ending

inventories in the prior year were RM3,000,000 and RM800,000 respectively.

3. Permai sold a land to Suria on 31 May 2018 for RM5,000,000. The book value of the

land on that date was RM4,000,000. This profit was included within other income.

4. Shares of the companies were traded as follows:

Suria Permai

1 January 2015 RM1.50 RM1.25

1 March 2018 RM1.40 RM1.50

5. All dividends were not paid during the current year. Dividend income was included

within other income.

6. Any gain or loss from disposal of shares was accounted in other income.

7. Assume company tax rate was 24%. Tax effects on unrealised profit for inter company's

transactions should be ignored.

8. There were no changes in the share capital for all the companies in the group.

9. Assume all revenues and expenses were accrued evenly throughout the year.

10. The group policy is to measure the non-controlling interest at fair value.

REQUIRED:

(a) Prepare the consolidation journal entries for the year ended 30 June 2018 using one

stage method.

(b) Prepare the Consolidated Statements of Profit or Loss and Other Comprehensive

Income for Alam Berhad for the year ended 30 June 2018.

(c) Prepare the Consolidated Statement of Financial Position for Alam Berhad as at 30 June 2018