On 1 July 2019, TITAN Bhd. acquired 80% interest in the equity capital of CIMA Bhd. CIMA retained profits was RM2,500.000 and the net aggregate fair value of assets and liabilities was RM5,000,000 at the time of acquisition. The following are the Statements of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020 for TITAN and CIMA. Revenue TITAN Bhd. (in RM) 14,000,000 (7,000,000) 7,000,000 CIMA Bhd. (in RM) 6,000,000 (3,500,000) 2,500,000 Cost of sales 150,000 Gross profit Other income: Gain on sale property Loss on sale equipment Selling and distribution expenses Administrative and other operating (2,100,000) (2,850,000) (50,000) (700,000) (1,190,000) expenses Profit from operations 2,200,000 560,000 Finance costs Profit before tax Income tax (200,000) 2,000,000 (250,000) 1,750,000 (60,000) 500,000 (100,000) 400,000 Profit after tax Other comprehensive income: Surplus on property revaluation Total comprehensive income 250,000 2,000,000 100,000 500,000 2 The followings are the Statements of Financial Position as at 30 June 2020 for TITAN and CIMA TITAN Bhd. CIMA Bhd. (in RM) 6,000,000 Property, plant and equipment Investment property Investment in CIMA (in RM) 12,000,000 2,000,000 4,500,000 1,200,000 488,000 642,000 20,830,000 400,000 60,000 200,000 6,660,000 Current assets Inventory Trade and other receivables Cash and cash equivalents TOTAL ASSETS Equity Equity attributable to owners of the parent 2,000,000 units 1,000,000 units Retained earnings Revaluation reserve Non-controlling interest Non-current liabilities 6,000,000 10,330,000 250,000 2,500,000 2,900,000 100,000 Loan from bank 4,000,000 1,000,000 Current liabilities Trade payables Loan from bank TOTAL EQUITIES AND LIABILITIES 150,000 100,000 20,830,000 60,000 100,000 6,660,000 3 Additional information: () During the financial year, TITAN sold RM360,000 inventories to CIMA at a selling price of RM720,000. It was determined that 40 percent of these inventories remained unsold by year-end. (i) During the year, TITAN sold two of its properties. One of the property is sold to CIMA for RM300,000 on 20 June 2019. The carrying amount of the property on the date is RM250,000 (iii) One 25 June 2019, CIMA sold one of its equipment to TITAN at loss of RM50,000. (iv) Trade receivables of TITAN include RM40,000 due from CIMA. (v) All profits are assumed to accrue evenly throughout the year and there is no impairment on consolidated goodwill. (vi) The non-controlling interest is measured by proportionate share on subsidiary net assets. Ignore tax effect arising from fair value adjustments, revaluation surpluses, and intra-group transactions. Required: (a) "Power is not only evidenced by more than 50 percent of shareholdings". Discuss the statement (b) Calculate the goodwill on the acquisition. (2 marks) (C) Show all the necessary journal entries for consolidation adjustments of the Statement of Profit or Loss and Other Comprehensive Income. (5 marks) (d) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020 for TITAN Bhd. and the Group. (10 marks) (e) Show all the necessary journal entries for consolidation adjustments of the Statement of Profit or Loss and Other Comprehensive Income. (5 marks) 4 (1) Prepare the Statement of Financial Position as at 30 June 2020 for TITAN Bhd. and the Group (10 marks) On 1 July 2019, TITAN Bhd. acquired 80% interest in the equity capital of CIMA Bhd. CIMA retained profits was RM2,500.000 and the net aggregate fair value of assets and liabilities was RM5,000,000 at the time of acquisition. The following are the Statements of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020 for TITAN and CIMA. Revenue TITAN Bhd. (in RM) 14,000,000 (7,000,000) 7,000,000 CIMA Bhd. (in RM) 6,000,000 (3,500,000) 2,500,000 Cost of sales 150,000 Gross profit Other income: Gain on sale property Loss on sale equipment Selling and distribution expenses Administrative and other operating (2,100,000) (2,850,000) (50,000) (700,000) (1,190,000) expenses Profit from operations 2,200,000 560,000 Finance costs Profit before tax Income tax (200,000) 2,000,000 (250,000) 1,750,000 (60,000) 500,000 (100,000) 400,000 Profit after tax Other comprehensive income: Surplus on property revaluation Total comprehensive income 250,000 2,000,000 100,000 500,000 2 The followings are the Statements of Financial Position as at 30 June 2020 for TITAN and CIMA TITAN Bhd. CIMA Bhd. (in RM) 6,000,000 Property, plant and equipment Investment property Investment in CIMA (in RM) 12,000,000 2,000,000 4,500,000 1,200,000 488,000 642,000 20,830,000 400,000 60,000 200,000 6,660,000 Current assets Inventory Trade and other receivables Cash and cash equivalents TOTAL ASSETS Equity Equity attributable to owners of the parent 2,000,000 units 1,000,000 units Retained earnings Revaluation reserve Non-controlling interest Non-current liabilities 6,000,000 10,330,000 250,000 2,500,000 2,900,000 100,000 Loan from bank 4,000,000 1,000,000 Current liabilities Trade payables Loan from bank TOTAL EQUITIES AND LIABILITIES 150,000 100,000 20,830,000 60,000 100,000 6,660,000 3 Additional information: () During the financial year, TITAN sold RM360,000 inventories to CIMA at a selling price of RM720,000. It was determined that 40 percent of these inventories remained unsold by year-end. (i) During the year, TITAN sold two of its properties. One of the property is sold to CIMA for RM300,000 on 20 June 2019. The carrying amount of the property on the date is RM250,000 (iii) One 25 June 2019, CIMA sold one of its equipment to TITAN at loss of RM50,000. (iv) Trade receivables of TITAN include RM40,000 due from CIMA. (v) All profits are assumed to accrue evenly throughout the year and there is no impairment on consolidated goodwill. (vi) The non-controlling interest is measured by proportionate share on subsidiary net assets. Ignore tax effect arising from fair value adjustments, revaluation surpluses, and intra-group transactions. Required: (a) "Power is not only evidenced by more than 50 percent of shareholdings". Discuss the statement (b) Calculate the goodwill on the acquisition. (2 marks) (C) Show all the necessary journal entries for consolidation adjustments of the Statement of Profit or Loss and Other Comprehensive Income. (5 marks) (d) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020 for TITAN Bhd. and the Group. (10 marks) (e) Show all the necessary journal entries for consolidation adjustments of the Statement of Profit or Loss and Other Comprehensive Income. (5 marks) 4 (1) Prepare the Statement of Financial Position as at 30 June 2020 for TITAN Bhd. and the Group (10 marks)