HH Bhd is a company established in Malaysia in 2002 and is actively involved in the trading and manufacturing of home furniture for domestic and international markets. Over the past few years, HH Bhd has acquired a few companies: CC Bhd and WW Bhd, to expand the business network and capturing a larger market. The summarised statements of financial position for the three companies as at 31 December 2019 are as follows: HH Bhd CC Bhd WW Bhd RM'000 RM'000 RM'000 1,300 4,270 98 1460 40 Assets Property, plant and equipment Intangibles Investments in CC Bhd: 1,500,000 ordinary shares 300,000 preference shares Investment in WW Bhd Investment in RN Bhd 2,500 300 430 1,100 1040 Current assets Inventories Bills receivables Trade receivables Ordinary dividend receivable Bank TOTAL ASSETS 805 220 328 90 228 10,369 711 85 195 64 58 3,653 544 43 220 8 76 2,191 1,250 Equity Ordinary shares 10% Preference shares General reserves Retained profit as at 1 January 2019 Profit for the year ended 31 December 2019 7,500 820 570 583 224 2,000 600 185 370 175 130 152 135 Non-current Liabilities Long term loan 285 68 135 Current Liabilities Bills payable Trade payables Ordinary dividend payable TOTAL EQUITIES AND LIABILITIES Additional information: 295 189 188 10,369 98 61 80 2,191 120 3,653 . . 1. HH Bhd acquired 75% of the 2,000,000 ordinary shares and 50% of the 600,000 preference shares in CC Bhd on 1 January 2018. The consideration transferred for the ordinary shares acquired was settled by CC Bhd's shareholders accepting 500,000 ordinary shares of HH Bhd which is valued at RM3.00 each and RM1,000,000 in cash. On the date of acquisition, the retained profit and general reserve of CC Bhd were RM254,000 and RM80,000 respectively. As at 31 December 2019, for the first time since the date of acquisition, the goodwill on consolidation of CC Bhd was impaired by 10%. 2. On 1 July 2019, HH Bhd and CC Bhd acquired 31% and 52% of the 1,250,000 ordinary shares of WW Bhd respectively when the retained profit and general reserves of WW Bhd was RM219,500 and RM130,000 respectively. The fair values of the net assets of WW Bhd on 1 July 2019 were equal to their carrying values except for: A factory that had fair value of RM250,000 more than it carrying value. No adjustment was made in WW Bhd to reflect this value. The remaining useful life of the factory was 50 years. A license which has a fair value of RM1,200,000 was not recorded in the financial statements since the license was granted at no cost to WW Bhd. The brand has indefinite useful life. 3. HH Bhd also acquired 40% of the ordinary shares in RN Bhd on 1 October 2019 and HH BHD has significant influence over RN BHd. On that date, the retained profits of RN Bhd were RM500,000 and the goodwill was RM150,000. 4. In November 2019, RN Bhd sold a piece of land to HH Bhd at a profit of RM20,000. As at 31 December 2019, the investment in RN Bhd was assessed to be impaired by RM10,000. The retained profits of RN Bhd as at 1 January 2019 was RM320,000 while the profit for the year ended 31 December 2019 is RM240,000. 5. It is the policy of the group to depreciate all assets using straight line method on yearly basis. 6. It is the group's policy to measure the non-controlling interest at its proportionate share of the fair value of the identifiable net assets of the subsidiary on the acquisition date. 7. Assume all profits accrue evenly throughout the year. Required: a. Compute goodwill/bargain purchase on the acquisition of CC Bhd. (3 Marks) b. Compute goodwill/bargain purchase on the acquisition of WW Bhd. (5 Marks) c. Prepare the consolidated statement of financial position of HH Bhd as at 31 December 2019. (22 marks) (Total: 30 marks) Note: Show all workings to RM'000 with two decimal point. HH Bhd is a company established in Malaysia in 2002 and is actively involved in the trading and manufacturing of home furniture for domestic and international markets. Over the past few years, HH Bhd has acquired a few companies: CC Bhd and WW Bhd, to expand the business network and capturing a larger market. The summarised statements of financial position for the three companies as at 31 December 2019 are as follows: HH Bhd CC Bhd WW Bhd RM'000 RM'000 RM'000 1,300 4,270 98 1460 40 Assets Property, plant and equipment Intangibles Investments in CC Bhd: 1,500,000 ordinary shares 300,000 preference shares Investment in WW Bhd Investment in RN Bhd 2,500 300 430 1,100 1040 Current assets Inventories Bills receivables Trade receivables Ordinary dividend receivable Bank TOTAL ASSETS 805 220 328 90 228 10,369 711 85 195 64 58 3,653 544 43 220 8 76 2,191 1,250 Equity Ordinary shares 10% Preference shares General reserves Retained profit as at 1 January 2019 Profit for the year ended 31 December 2019 7,500 820 570 583 224 2,000 600 185 370 175 130 152 135 Non-current Liabilities Long term loan 285 68 135 Current Liabilities Bills payable Trade payables Ordinary dividend payable TOTAL EQUITIES AND LIABILITIES Additional information: 295 189 188 10,369 98 61 80 2,191 120 3,653 . . 1. HH Bhd acquired 75% of the 2,000,000 ordinary shares and 50% of the 600,000 preference shares in CC Bhd on 1 January 2018. The consideration transferred for the ordinary shares acquired was settled by CC Bhd's shareholders accepting 500,000 ordinary shares of HH Bhd which is valued at RM3.00 each and RM1,000,000 in cash. On the date of acquisition, the retained profit and general reserve of CC Bhd were RM254,000 and RM80,000 respectively. As at 31 December 2019, for the first time since the date of acquisition, the goodwill on consolidation of CC Bhd was impaired by 10%. 2. On 1 July 2019, HH Bhd and CC Bhd acquired 31% and 52% of the 1,250,000 ordinary shares of WW Bhd respectively when the retained profit and general reserves of WW Bhd was RM219,500 and RM130,000 respectively. The fair values of the net assets of WW Bhd on 1 July 2019 were equal to their carrying values except for: A factory that had fair value of RM250,000 more than it carrying value. No adjustment was made in WW Bhd to reflect this value. The remaining useful life of the factory was 50 years. A license which has a fair value of RM1,200,000 was not recorded in the financial statements since the license was granted at no cost to WW Bhd. The brand has indefinite useful life. 3. HH Bhd also acquired 40% of the ordinary shares in RN Bhd on 1 October 2019 and HH BHD has significant influence over RN BHd. On that date, the retained profits of RN Bhd were RM500,000 and the goodwill was RM150,000. 4. In November 2019, RN Bhd sold a piece of land to HH Bhd at a profit of RM20,000. As at 31 December 2019, the investment in RN Bhd was assessed to be impaired by RM10,000. The retained profits of RN Bhd as at 1 January 2019 was RM320,000 while the profit for the year ended 31 December 2019 is RM240,000. 5. It is the policy of the group to depreciate all assets using straight line method on yearly basis. 6. It is the group's policy to measure the non-controlling interest at its proportionate share of the fair value of the identifiable net assets of the subsidiary on the acquisition date. 7. Assume all profits accrue evenly throughout the year. Required: a. Compute goodwill/bargain purchase on the acquisition of CC Bhd. (3 Marks) b. Compute goodwill/bargain purchase on the acquisition of WW Bhd. (5 Marks) c. Prepare the consolidated statement of financial position of HH Bhd as at 31 December 2019. (22 marks) (Total: 30 marks) Note: Show all workings to RM'000 with two decimal point