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Great Bhd is a public company listed in the food and beverage sector. It produces and markets packaged foods and soft drinks. The company acquires control of companies in the construction, healthcare, and technology sectors to diversify its business risks. Investment in Big Bhd Great Bhd acquired 75% of ordinary shares in Big Bhd, a construction company for RM960 million on 1 January 2018, when Big Bhd's asset revaluation reserve and retained profit was RM108 million and RM100 million, respectively. The fair value of Big Bhd's net assets on the date of acquisition was equal to the carrying amount. For the year ended 31 December 2021, the goodwill from investment in Big Bhd has been impaired by 10%. The impairment loss has yet to be adjusted in Great Bhd's book. Investment in Excel Bhd 1 January 2020, Great Bhd acquired 60% of ordinary share capital and RM45 million of the 8% debentures of Excel Bhd, a healthcare company, for a cash consideration of RM322.5 million and RM45 million, respectively. On the date of acquisition, the asset revaluation reserve and retained profit of Excel Bhd were RM72 million and RM117 million, respectively. The fair value of Excel Bhd's freehold land was RM 3 million over its carrying amount at the date of acquisition. Excel Bhd has not adjusted this amount to reflect the fair value in its books. On January 2021, Great Bhd acquired another 20% of the ordinary shares of Excel Bhd. The consideration amounting to RM67.2 million was paid by issuing 12 million new shares. Great Bhd has not recorded this transaction. On that date, the fair value of the identifiable net asset of Excel Bhd was equal to its carrying value except for the unadjusted fair value for the freehold land as mentioned above. Investment in Good Bhd On 1 January 2021, Big Bhd acquired 60 million out of 75 million units of ordinary shares of Good Bhd, a technology company. The acquisition was settled through a cash consideration of RM180 million. As of the acquisition date, the carrying amount of Good Bhd's net asset was equal to its fair value except for a freehold land that has an excess of RM1.6 million. On 31 December 2021, the freehold land was revalued again, resulting in an increase of RM700,000. These revaluations have not been incorporated in Good Bhd's account as at year-end. Investment in Small Bhd On 1 July 2021, Great Bhd acquired 25% interest in Small Bhd for a cash consideration of RM45 million. Great Bhd had a significant influence over Small Bhd's operating and financial activities. The fair value of Small Bhd's net assets on this date was equal to the carrying amount. For the year ended 31 December 2021, Small Bhd has reported a net profit of RM18 million. After becoming an associate, Small Bhd has made some purchases from Great Bhd for a total of invoices of RM8 million. 75% of these purchases have been sold to third party. Great Bhd made a profit of 20% on cost from these sales. At the end of the year, the investment in Small Bhd has been reviewed and it was concluded that the investment is impaired by RM200,000. Accounting policies of Great Bhd's Group The group measured its non-controlling interest at its proportionate share of the fair value of the identifiable net assets of the subsidiaries as at the date of the acquisitions. Full depreciation is provided in the year of acquisition but none in the year of disposal. Great Bhd's Group and its subsidiaries always sell their goods at a markup of 20% on cost. Profits and losses are deemed to accrue evenly throughout the year. Financial Statements The following information was taken from the books of Great Bhd and its subsidiaries. Statement of Financial Position as at 31 December 2021 Great Bhd RM million 2,141.1 Big Bhd RM Million 1,452 180 Excel Bhd RM million 630 Good Bhd RM million 180 Property, Plant and Equipment Investment in Subsidiaries and 1,552.5 Associate Other Investment 360 165 Intangibles 180 93 39 21 Bank 195 123 72 54 Receivables 201 123 96 60 177 63 45 33 Inventory Total 4,806.6 2,199 882 348 Ordinary Shares" 2,400 1.050 300 90 6% Preference Shares 300 240 Retained profits 552 207 150 Asset Revaluation Reserve 534 108 72 8% Debentures 450 300 150 Payables 441 219 171 129.6 75 39 Accruals Total 4,806.6 2,199 882 "Number of units of ordinary shares Companies No. of units of OSC Great Bhd 600 million Big Bhd 300 million Excel Bhd 150 million - 81 24 132 21 348 Good Bhd 75 million Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31 December 2021 Great Bhd RM million 270 Big Bhd RM Million 213 Excel Bhd RM million Good Bhd RM million 183 90 Revenue Cost of Sales (168) (120) (105) (45) Gross Profits 102 93 78 45 Gain on disposal of PPE 15 6 Investment income 36 15 Expenses (57) (36) (24) (9) Profit Before Taxation 96 72 60 36 Taxation (23.1) (17.4) (14.4) (8.7) Net Profit 72.9 54.6 45.6 27.3 Other comprehensive income Increase in revaluation 24 Total comprehensive income 96.9 54.6 45.6 27.3 Great Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Preference Retained Capital Asset Revaluation Reserve Share Capital Profits RM million RM million RM million RM million Balance b/f 2400 300 510 539.1 Revaluation 24 Net profit 72.9 Dividend (60) Balance c/f 2400 300 534 552 Big Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Capital Preference Share Capital Asset Revaluation Reserve Retained Profits RM million RM million RM million RM million 108 Balance b/f 1050 240 182.4 54.6 Net profit Dividend (30) Balance c/f 1050 240 108 207 Excel Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Asset Revaluation Retained Profits RM million Capital Reserve RM million RM million 300 72 119.4 Balance b/f Net profit Dividend 45.6 (15) Balance c/f 300 72 150 Good Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Asset Revaluation Retained Profits Capital Reserve RM million RM million RM million 24 Balance b/f 90 59.7 Net profit 27.3 Dividend (6) Balance c/f 90 24 81 Additional information Inter-company sales and purchases: For the year ended 31 December 2021, Great Bhd sold goods to Big Bhd and Excel Bhd at an invoice price of RM60 million and RM30 million, respectively. Big Bhd and Excel Bhd have managed to sell off 50% of the inventories to third parties. At the end of the year, Big Bhd has not made any payment to Great Bhd yet, while Excel Bhd has remitted RM16.2 million of the amounts due to Great Bhd on 27 December 2021. However, Great Bhd has only received the amount on 5 January 2022. Inter-company disposal of assets: During the year, Great Bhd has sold a machine making a profit of RM12 million to Good Bhd. The machine has a remaining useful life of 4 years on 31 December 2021. Excel Bhd had also disposed of a motor vehicle at a profit of RM4.5 million to Big Bhd during the year when the remaining useful life of the motor vehicle was 5 years. Dividends: The dividends declared and paid for the year ended 31 December 2021 were final ordinary dividends and full-year preference dividends. Great Bhd and Big Bhd have recognised their share of dividends from their subsidiaries as other income. Interest on debentures: Interest on debentures for the year ended 31 December 2021 has been paid by both Big Bhd and Excel Bhd and charged as expenses. their current statements of Profit or Loss. Great Bhd has recognized its share of interest of debentures from its subsidiary in its investment income. Required: a. Compute goodwill/bargain purchase on the acquisition of Big Bhd, Excel Bhd and Good Bhd. (12 marks) b. Calculate gain/losses arising from the second acquisition of shares i Excel Bhd. (4 marks) C. Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021. (24 marks) d. Prepare the Consolidated Statement of Changes in Equity for the year ended 31 December 2021. (13 marks) e. Prepare the Consolidated Statement of Financial Position as at 31 December 2021. (17 marks) (Total: 70 marks) (ROUND OFF YOUR ANSWERS INTO RM MILLION WITH TWO DECIMAL POINTS) Great Bhd is a public company listed in the food and beverage sector. It produces and markets packaged foods and soft drinks. The company acquires control of companies in the construction, healthcare, and technology sectors to diversify its business risks. Investment in Big Bhd Great Bhd acquired 75% of ordinary shares in Big Bhd, a construction company for RM960 million on 1 January 2018, when Big Bhd's asset revaluation reserve and retained profit was RM108 million and RM100 million, respectively. The fair value of Big Bhd's net assets on the date of acquisition was equal to the carrying amount. For the year ended 31 December 2021, the goodwill from investment in Big Bhd has been impaired by 10%. The impairment loss has yet to be adjusted in Great Bhd's book. Investment in Excel Bhd 1 January 2020, Great Bhd acquired 60% of ordinary share capital and RM45 million of the 8% debentures of Excel Bhd, a healthcare company, for a cash consideration of RM322.5 million and RM45 million, respectively. On the date of acquisition, the asset revaluation reserve and retained profit of Excel Bhd were RM72 million and RM117 million, respectively. The fair value of Excel Bhd's freehold land was RM 3 million over its carrying amount at the date of acquisition. Excel Bhd has not adjusted this amount to reflect the fair value in its books. On January 2021, Great Bhd acquired another 20% of the ordinary shares of Excel Bhd. The consideration amounting to RM67.2 million was paid by issuing 12 million new shares. Great Bhd has not recorded this transaction. On that date, the fair value of the identifiable net asset of Excel Bhd was equal to its carrying value except for the unadjusted fair value for the freehold land as mentioned above. Investment in Good Bhd On 1 January 2021, Big Bhd acquired 60 million out of 75 million units of ordinary shares of Good Bhd, a technology company. The acquisition was settled through a cash consideration of RM180 million. As of the acquisition date, the carrying amount of Good Bhd's net asset was equal to its fair value except for a freehold land that has an excess of RM1.6 million. On 31 December 2021, the freehold land was revalued again, resulting in an increase of RM700,000. These revaluations have not been incorporated in Good Bhd's account as at year-end. Investment in Small Bhd On 1 July 2021, Great Bhd acquired 25% interest in Small Bhd for a cash consideration of RM45 million. Great Bhd had a significant influence over Small Bhd's operating and financial activities. The fair value of Small Bhd's net assets on this date was equal to the carrying amount. For the year ended 31 December 2021, Small Bhd has reported a net profit of RM18 million. After becoming an associate, Small Bhd has made some purchases from Great Bhd for a total of invoices of RM8 million. 75% of these purchases have been sold to third party. Great Bhd made a profit of 20% on cost from these sales. At the end of the year, the investment in Small Bhd has been reviewed and it was concluded that the investment is impaired by RM200,000. Accounting policies of Great Bhd's Group The group measured its non-controlling interest at its proportionate share of the fair value of the identifiable net assets of the subsidiaries as at the date of the acquisitions. Full depreciation is provided in the year of acquisition but none in the year of disposal. Great Bhd's Group and its subsidiaries always sell their goods at a markup of 20% on cost. Profits and losses are deemed to accrue evenly throughout the year. Financial Statements The following information was taken from the books of Great Bhd and its subsidiaries. Statement of Financial Position as at 31 December 2021 Great Bhd RM million 2,141.1 Big Bhd RM Million 1,452 180 Excel Bhd RM million 630 Good Bhd RM million 180 Property, Plant and Equipment Investment in Subsidiaries and 1,552.5 Associate Other Investment 360 165 Intangibles 180 93 39 21 Bank 195 123 72 54 Receivables 201 123 96 60 177 63 45 33 Inventory Total 4,806.6 2,199 882 348 Ordinary Shares" 2,400 1.050 300 90 6% Preference Shares 300 240 Retained profits 552 207 150 Asset Revaluation Reserve 534 108 72 8% Debentures 450 300 150 Payables 441 219 171 129.6 75 39 Accruals Total 4,806.6 2,199 882 "Number of units of ordinary shares Companies No. of units of OSC Great Bhd 600 million Big Bhd 300 million Excel Bhd 150 million - 81 24 132 21 348 Good Bhd 75 million Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31 December 2021 Great Bhd RM million 270 Big Bhd RM Million 213 Excel Bhd RM million Good Bhd RM million 183 90 Revenue Cost of Sales (168) (120) (105) (45) Gross Profits 102 93 78 45 Gain on disposal of PPE 15 6 Investment income 36 15 Expenses (57) (36) (24) (9) Profit Before Taxation 96 72 60 36 Taxation (23.1) (17.4) (14.4) (8.7) Net Profit 72.9 54.6 45.6 27.3 Other comprehensive income Increase in revaluation 24 Total comprehensive income 96.9 54.6 45.6 27.3 Great Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Preference Retained Capital Asset Revaluation Reserve Share Capital Profits RM million RM million RM million RM million Balance b/f 2400 300 510 539.1 Revaluation 24 Net profit 72.9 Dividend (60) Balance c/f 2400 300 534 552 Big Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Capital Preference Share Capital Asset Revaluation Reserve Retained Profits RM million RM million RM million RM million 108 Balance b/f 1050 240 182.4 54.6 Net profit Dividend (30) Balance c/f 1050 240 108 207 Excel Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Asset Revaluation Retained Profits RM million Capital Reserve RM million RM million 300 72 119.4 Balance b/f Net profit Dividend 45.6 (15) Balance c/f 300 72 150 Good Bhd Statement of Changes in Equity for the Year Ended 31 December 2021 Ordinary Share Asset Revaluation Retained Profits Capital Reserve RM million RM million RM million 24 Balance b/f 90 59.7 Net profit 27.3 Dividend (6) Balance c/f 90 24 81 Additional information Inter-company sales and purchases: For the year ended 31 December 2021, Great Bhd sold goods to Big Bhd and Excel Bhd at an invoice price of RM60 million and RM30 million, respectively. Big Bhd and Excel Bhd have managed to sell off 50% of the inventories to third parties. At the end of the year, Big Bhd has not made any payment to Great Bhd yet, while Excel Bhd has remitted RM16.2 million of the amounts due to Great Bhd on 27 December 2021. However, Great Bhd has only received the amount on 5 January 2022. Inter-company disposal of assets: During the year, Great Bhd has sold a machine making a profit of RM12 million to Good Bhd. The machine has a remaining useful life of 4 years on 31 December 2021. Excel Bhd had also disposed of a motor vehicle at a profit of RM4.5 million to Big Bhd during the year when the remaining useful life of the motor vehicle was 5 years. Dividends: The dividends declared and paid for the year ended 31 December 2021 were final ordinary dividends and full-year preference dividends. Great Bhd and Big Bhd have recognised their share of dividends from their subsidiaries as other income. Interest on debentures: Interest on debentures for the year ended 31 December 2021 has been paid by both Big Bhd and Excel Bhd and charged as expenses. their current statements of Profit or Loss. Great Bhd has recognized its share of interest of debentures from its subsidiary in its investment income. Required: a. Compute goodwill/bargain purchase on the acquisition of Big Bhd, Excel Bhd and Good Bhd. (12 marks) b. Calculate gain/losses arising from the second acquisition of shares i Excel Bhd. (4 marks) C. Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021. (24 marks) d. Prepare the Consolidated Statement of Changes in Equity for the year ended 31 December 2021. (13 marks) e. Prepare the Consolidated Statement of Financial Position as at 31 December 2021. (17 marks) (Total: 70 marks) (ROUND OFF YOUR ANSWERS INTO RM MILLION WITH TWO DECIMAL POINTS)