Question
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
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
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