Hee Hee Bhd had acquired 80% interest in Choo Choo Bhd for RM30 million. A fair valuation

exercise conducted on the date of acquisition revealed that Choo Choo Bhd's fair value of net assets

was equal to its carrying amounts. On the date of acquisition, the fair value of the net assets of Choo

Choo Bhd was RM25 million.

On 1 January 2021, Hee Hee Bhd disposed 50% of its interests in Choo Choo Bhd to Adam Bhd for

RM50 million when the fair value of the net assets of Choo Choo Bhd was RM70 million. On the date

of disposal, the fair value of the remaining shares was RM20 million.

The financial year ended of Hee Hees group is on 31 December every year. The goodwill on

acquisition remains unimpaired since the date of acquisition. It is the groups policy to value the non

controlling interests at its proportionate share of the fair value of the subsidiarys identifiable net

assets at the acquisition date.

Required:

a) Calculate the gain or loss on the disposal of the share for the Hee Hee Group.

(5 marks)

b) Discuss the relationship between Hee Hee Bhd and Choo Choo Bhd after the disposal.

(5 marks)