Oula ltd. is one of the leading business group in Sultanate of Oman. More than 5000 employees are working in this group. With its commitment and strong focus in providing engineering solutions to the Oil & Gas, Petrochemicals, Power, Water and Wastewater sectors, Oula ltd. Group has been structured into three Strategic Business Units (SBUs): Contracting, Trading & Manufacturing. With its commitment and strong focus in providing engineering solutions to the Oil & Gas, Petrochemicals, Power, Water and Wastewater sectors, Oula has been structured into three Strategic Business Units (SBUs): Contracting, Trading & Manufacturing.

A) Oula ltd has been holding OMR 250,000 investment in Rahima. Rahima’s financial statements showed that it had issued and paid up capital of OMR 500,000. In March 2019, Arib wanted to make a deal to purchase all the shares of Rahima. The offer was supported by the majority of Rahima’s directors. As Rahima ltd. is a well established company. So, Oula ltd. does not want to sell. On 1st April 2019, Arib made an announcement saying that it had bought the remaining shares of Rahima.

Required:
a. What method will be used to record the investment by Oula ltd. in Rahima?(1 mark)

b. Explain how the investment in Rahima should be treated in the Statement of Comprehensive Income of Oula ltd for the year ended 31st December 2019 and the consolidated statement of financial position at 31st December 2019. (3 marks)

B) On January 1, 2020, Oula issued bonds with a par value of OMR 500,000 at 98, due in 2030. On January 1, 2024, the entire issue was called at 103 and cancelled. Interest is paid annually, and the discount is amortized using the straight-line method.

a. Do bonds need to be amortized? Under what circumstances the bonds are amortized? (1 mark)

b. What is the procedure followed to amortize the bonds? Calculate the profit or loss on redemption. (3 marks)