Non-Current liabilities 7% Loan notes 500 6,000 7,000 1.000 Current liabilities Bank Trade payables 350 250 5,700 3,250 1,350 Income tax 1,300 950 650 100 7.000 4,200 2,000 700 and Total Equities Liabilities 38,000 25,800 10,600 1,850 The following information is available: (1) Hendrix acquired 12 million shares in Mozart on 1 January 2016 for RM 8,500,000 when Mozart's retained earnings were RM 4,500,000 (ii) Mozart acquired 8.4 million shares in Fitzgerald on 1 January 2019 for RM 5,500,000 when Fitzgerald's retained earnings were RM 1,500,000 (iii) Hendrix acquired 200,000 shares in Reno on 1 January 2020 the date Reno was incorporated. (iv) When Hendrix acquired its shareholding in Mozart it was deemed that Mozart's property, plant and equipment exceeded its book value by RM 600,000. The excess of fair value over book value was attributed to property owned by Mozart. At the date of acquisition this property had a remaining useful life of 20 years. Mozart's accounting policy is to depreciate property over its useful economic life. (v) No fair value adjustments were required in respect of assets and liabilities for any of the other acquisitions. (vi) During the period from 1 January 2020 to 31 December 2020, Mozart sold goods to Hendrix for RM 790,000 at a mark-up of 30% on cost. The value of these goods included in closing inventories is RM 390,000. (vii) Following an impairment review it was decided the goodwill in Mozart should be impaired by 12%. The goodwill in Fitzgerald is unchanged. ACC 4215 (F) /Page 4 of 5 Required: a. Prepare the consolidated statement of financial position for the Hendrix group as at 31" December 2020. (Work to the nearest RM 1,000). Marks will be awarded for correct workings (36 marks) b. Explain why the net assets of subsidiary companies are included at acquisition at their fair (current) value in the consolidated statement of financial position. How is this consistent when most of the parent's assets are carried at historical cost? (6 marks) c. Hendrix is planning to set up a subsidiary in Paris which will use the Euro as its' functional currency. Explain how the accounts of such a subsidiary will be consolidated in the financial statements of the Hendrix Group. (4 marks) d. Hendrix is planning to purchase goods for resale from a US supplier, paying in US dollars. Explain how purchases made in US dollars would be recorded in the accounts of Hendrix. (4 marks) Total: 50 marks Non-Current liabilities 7% Loan notes 500 6,000 7,000 1.000 Current liabilities Bank Trade payables 350 250 5,700 3,250 1,350 Income tax 1,300 950 650 100 7.000 4,200 2,000 700 and Total Equities Liabilities 38,000 25,800 10,600 1,850 The following information is available: (1) Hendrix acquired 12 million shares in Mozart on 1 January 2016 for RM 8,500,000 when Mozart's retained earnings were RM 4,500,000 (ii) Mozart acquired 8.4 million shares in Fitzgerald on 1 January 2019 for RM 5,500,000 when Fitzgerald's retained earnings were RM 1,500,000 (iii) Hendrix acquired 200,000 shares in Reno on 1 January 2020 the date Reno was incorporated. (iv) When Hendrix acquired its shareholding in Mozart it was deemed that Mozart's property, plant and equipment exceeded its book value by RM 600,000. The excess of fair value over book value was attributed to property owned by Mozart. At the date of acquisition this property had a remaining useful life of 20 years. Mozart's accounting policy is to depreciate property over its useful economic life. (v) No fair value adjustments were required in respect of assets and liabilities for any of the other acquisitions. (vi) During the period from 1 January 2020 to 31 December 2020, Mozart sold goods to Hendrix for RM 790,000 at a mark-up of 30% on cost. The value of these goods included in closing inventories is RM 390,000. (vii) Following an impairment review it was decided the goodwill in Mozart should be impaired by 12%. The goodwill in Fitzgerald is unchanged. ACC 4215 (F) /Page 4 of 5 Required: a. Prepare the consolidated statement of financial position for the Hendrix group as at 31" December 2020. (Work to the nearest RM 1,000). Marks will be awarded for correct workings (36 marks) b. Explain why the net assets of subsidiary companies are included at acquisition at their fair (current) value in the consolidated statement of financial position. How is this consistent when most of the parent's assets are carried at historical cost? (6 marks) c. Hendrix is planning to set up a subsidiary in Paris which will use the Euro as its' functional currency. Explain how the accounts of such a subsidiary will be consolidated in the financial statements of the Hendrix Group. (4 marks) d. Hendrix is planning to purchase goods for resale from a US supplier, paying in US dollars. Explain how purchases made in US dollars would be recorded in the accounts of Hendrix. (4 marks) Total: 50 marks