Assume that you are Charmaine Yuen, the accounting manager, and you are required to draft a memorandum to Ms. Pindy Lee, a Director of APE. In your memorandum, you should: (a) For the investment in DPE in the consolidated financial statements of APE, identify and justify the applicable financial reporting standard, and advise the appropriate classification and accounting treatment. (You are not required to describe the detailed accounting method.) (b) Discuss and advise as to the accounting treatments for the bankrupt customer in the consolidated financial statements of APE for the year ended 31 March 2012.

(c) Prepare annex to your memorandum showing worksheets for:

(i) the consolidated statement of comprehensive income of APE for the year ended 31 March 2012, (ii) the consolidated statement of financial position of APE as at 31 March 2012, and (Ignore the deferred tax implications. Consolidation adjustments are to be shown in the form of a worksheet provided below. For Question 1(c)(i) and (ii), you may use the template provided below. You are required to show the detailed calculations for each figure, journal entries are also required.)

For Question 1(c)(i) APE - Worksheet for the Consolidated Statement of Comprehensive Income for the year ended 31 March 2012 Refer to APE EPE Dr Cr journal # Consolidated HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 Sales 80,000 35,750 Cost of sales (55,000) (24,500) Other income (including gain on disposal and EPE's dividend) 3,700 - Depreciation expense (8,000) (1,700) Interest expense (5,900) (1,600) Other expenses (3,800) (4,200) Share of profits of FPE Profit for the year 11,000 3,750 Profit attributable to: Owners of the parent Non-controlling interests

For Question 1(c)(ii) APE - Worksheet for the Consolidated Statement of Financial Position as at 31 March 2012 Refer to APE EPE Dr Cr journal # Consolidated HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 Plant and equipment, net 43,000 19,000 Investment in EPE, cost 26,550 - Investment in FPE, cost 7,450 - Other investments 20,750 1,250 Inventory 41,250 20,000 Receivables 10,000 11,000 Cash and cash equivalents 7,500 8,750 156,500 60,000 - Share capital (HK$1 par) 30,000 15,000 Retained earnings 51,500 25,000 Payables 75,000 20,000 156,500 60,000