Pear Limited is a company incorporated in Hong Kong. Its main business is the sales of fresh and canned pears. Pear Limited had long-term equity investments in two companies. The information about the acquisition of the issued share of the two companies was as follows: Date of incorporation Location of incorporation Acquisition date Percentage of shares acquired Purchase consideration Issued share capital at acquisition date Retained profits at acquisition date Salak Limited 2001 Hong Kong January 2, 2015 80% $38,000,000 $30,000,000 $15,000,000 Apricot Limited 2002 Hong Kong January 2, 2016 30% $2,100,000 $4,000,000 $2,000,000 Additional information: 1. At acquisition date, the carrying amounts of all identifiable assets and liabilities of Salak Limited were equal to their fair values, except for a piece of land owned by Salak Limited The fair value of the piece of land was $ 700,000 in excess of its carrying amount. 2. Below was the information about the sales and purchases between Pear Limited, Salak Limited and Apricot Limited during 2017: (i) Pear Limited owned a piece of equipment with a purchase price of $800,000. In the books of Pear Limited, the accumulated depreciation of the equipment was $300,000. On January 2, 2017, Pear Limited sold the equipment to Salak Limited at a price of $600,000. At the transaction date, the remaining useful life of the equipment was four years. (ii) Salak Limited sold goods to Pear Limited with a total value of $700.000, The goods were invoiced at cost plus 25%. The value of unsold goods in the hands of Pear Limited at year end was $200,000. (iii) Apricot Limited sold goods to Pear Limited. The selling price and the cost of sales were $600,000 and $200,000, respectively. At year end, the percentage of unsold goods in the books of Pear Limited was 20%. 3. Below was the information about the dividend distribution paid by Salak Limited and Apricot Limited during 2017: (i) Salak Limited paid dividend of $900,000 on December 10, 2017 (ii) Apricot Limited paid dividend of $500,000 on October 30, 2017 Page 2 of 11 ACT B407F (1704) 600 *NO DE ...11 36 67% 16:21 2020-06-25 15.... IE a 4. For the acquisition of Salak Limited, consolidated goodwill was not impaired at December 31, 2017. There has been no change in the issued share capital of Salak Limited and Apricot Limited since the squisition by Pear Limited. No goodwill was recorded in the acquisition of Apricot Limited 5. Company policy of Pear Limited, Salak Limited, and Apricot Limited: (1) Historical cost model was adopted to account for non-current assets (ii) Non-current assets were depreciated on a straight-line basis. Cili) Depreciation was not charged on land (iv) The depreciation expense was included in other operating expenses (v) Financial year end was on December 31 (vi) Non-controlling interest was accounted for using the net assets approach (vii) The sales and purchase between companies were on cash basis. 6. Mr and Mrs Pear were the chief executive officer (CEO) and the chairperson of Pear Limited, respectively. They also served on the board of Salak Limited. Below was the information about the compensation of the chairperson, CEO, and board of directors of Pear Limited, Saluk Limited, and Apricot Limited for the year ended December 31, 2017: Pear Limited: Salary 50,000 Director tee 20,000 100,000 Mrs Pear Mr Pear Mr Orange Ms Pineapple Mr Grape Position Chairperson CEO Director Director Director Total 20,000 20,000 20.000 80,000 Retirement benefits 500 500 500 500 500 2.500 150,000 Salak Limited: Position Mrs Suluk Chairperson Mr Salak CEO Mr Pear Director Mrs Pear Director Mr Melon Director Total Salary Director fee Retirement benefits 30,000 10,000 400 80,000 400 10,000 400 10.000 400 10,000 400 110,000 40.000 2,000 Apricot Limited: Position Mrs Apricot Chairperson Mr Apricot CEO Mr Lime Director Ms Kiwi Director Mr Coconut Director Total Salary Director fee Retirement benefits 25,000 15,000 300 90,000 300 15,000 300 15,000 300 15,000 300 115,000 60,000 1,500 Page 3 of 11 ACT 1407F (1704) 600 *NO DG .36 67% 9 16:22 2020-06-25 15.... E 2 Drall statements of profit or loss of Pear Limited, Salak Limited and Apricot Limited for the year ended December 31, 2017 were as follows: Pear Limited Salak Limited Apricot Limited S000 S000 S600 Revenue 28.000 22.000 25.000 Cost of sales (19,000) (2.000) (11,000 Gross profit 9,000 15.000 Other income 14,000 970 9.970 15.000 14,000 Distribution cost (800) (700) (600) Administration expenses (700) (600) (SOD) Other operating expenses (600) (500) (400 Profit before taxation 7,870 13.200 12,500 Taxation (500) (400) (300) Profit for the year 7.370 12,800 12.200 Drall statements of financial position of Pear Limited, Salak Limited and Apricot Limited as at December 31, 2017 were as follows: Pear Limited SIXIO Salak Limited S000 Apricot Limited S000 50.000 15,500 Non-current assets Property, plant and equipment Investment in Salak Limited Investment in Apricot Limited Long-term loan to Pear Limited 17,200 38,000 2.100 600 Current assets Inventories Cash Total assets 9.500 7,370 74,170 9,000 9,400 68,400 8.800 6.800 31,700 Share capital Retained profits Total equity 35.000 37,370 72,370 30,000 37,900 67.900 4,000 26,700 30,700 600 Long-term loan from Apricot Limited 700 500 1.800 74,170 Accounts payable Tax payable Total liabilities Total equity and liabilities 300 200 500 68.400 600 400 1,000 31,700 ACT 407F (1704) 600 *NO D 46+ ...11 36 21 67% 9 16:22 2020-06-25 15.... E a Required: Question 1 (35 marks) (a) Prepare the consolidated statement of profit or loss for Pear Group for the period ended December 31, 2017 (15 marks) (b) Prepare the consolidated statement of financial position for Pear Group as at December 31, 2017 (20 marks) Question 2 (15 marks) (a) Prepare the group related party disclosures for the related party relationship and related party transactions in the consolidated financial statements of Pear Group as at December 31, 2017 (8 marks) (b) Prepare the group related party disclosures for the key management personnel compensation in the consolidated financial statements of Pear Group is at December 31, 2017 (7 marks) END OF SECTIONAL Page 5 of 11 ACT B407F (1704) Pear Limited is a company incorporated in Hong Kong. Its main business is the sales of fresh and canned pears. Pear Limited had long-term equity investments in two companies. The information about the acquisition of the issued share of the two companies was as follows: Date of incorporation Location of incorporation Acquisition date Percentage of shares acquired Purchase consideration Issued share capital at acquisition date Retained profits at acquisition date Salak Limited 2001 Hong Kong January 2, 2015 80% $38,000,000 $30,000,000 $15,000,000 Apricot Limited 2002 Hong Kong January 2, 2016 30% $2,100,000 $4,000,000 $2,000,000 Additional information: 1. At acquisition date, the carrying amounts of all identifiable assets and liabilities of Salak Limited were equal to their fair values, except for a piece of land owned by Salak Limited The fair value of the piece of land was $ 700,000 in excess of its carrying amount. 2. Below was the information about the sales and purchases between Pear Limited, Salak Limited and Apricot Limited during 2017: (i) Pear Limited owned a piece of equipment with a purchase price of $800,000. In the books of Pear Limited, the accumulated depreciation of the equipment was $300,000. On January 2, 2017, Pear Limited sold the equipment to Salak Limited at a price of $600,000. At the transaction date, the remaining useful life of the equipment was four years. (ii) Salak Limited sold goods to Pear Limited with a total value of $700.000, The goods were invoiced at cost plus 25%. The value of unsold goods in the hands of Pear Limited at year end was $200,000. (iii) Apricot Limited sold goods to Pear Limited. The selling price and the cost of sales were $600,000 and $200,000, respectively. At year end, the percentage of unsold goods in the books of Pear Limited was 20%. 3. Below was the information about the dividend distribution paid by Salak Limited and Apricot Limited during 2017: (i) Salak Limited paid dividend of $900,000 on December 10, 2017 (ii) Apricot Limited paid dividend of $500,000 on October 30, 2017 Page 2 of 11 ACT B407F (1704) 600 *NO DE ...11 36 67% 16:21 2020-06-25 15.... IE a 4. For the acquisition of Salak Limited, consolidated goodwill was not impaired at December 31, 2017. There has been no change in the issued share capital of Salak Limited and Apricot Limited since the squisition by Pear Limited. No goodwill was recorded in the acquisition of Apricot Limited 5. Company policy of Pear Limited, Salak Limited, and Apricot Limited: (1) Historical cost model was adopted to account for non-current assets (ii) Non-current assets were depreciated on a straight-line basis. Cili) Depreciation was not charged on land (iv) The depreciation expense was included in other operating expenses (v) Financial year end was on December 31 (vi) Non-controlling interest was accounted for using the net assets approach (vii) The sales and purchase between companies were on cash basis. 6. Mr and Mrs Pear were the chief executive officer (CEO) and the chairperson of Pear Limited, respectively. They also served on the board of Salak Limited. Below was the information about the compensation of the chairperson, CEO, and board of directors of Pear Limited, Saluk Limited, and Apricot Limited for the year ended December 31, 2017: Pear Limited: Salary 50,000 Director tee 20,000 100,000 Mrs Pear Mr Pear Mr Orange Ms Pineapple Mr Grape Position Chairperson CEO Director Director Director Total 20,000 20,000 20.000 80,000 Retirement benefits 500 500 500 500 500 2.500 150,000 Salak Limited: Position Mrs Suluk Chairperson Mr Salak CEO Mr Pear Director Mrs Pear Director Mr Melon Director Total Salary Director fee Retirement benefits 30,000 10,000 400 80,000 400 10,000 400 10.000 400 10,000 400 110,000 40.000 2,000 Apricot Limited: Position Mrs Apricot Chairperson Mr Apricot CEO Mr Lime Director Ms Kiwi Director Mr Coconut Director Total Salary Director fee Retirement benefits 25,000 15,000 300 90,000 300 15,000 300 15,000 300 15,000 300 115,000 60,000 1,500 Page 3 of 11 ACT 1407F (1704) 600 *NO DG .36 67% 9 16:22 2020-06-25 15.... E 2 Drall statements of profit or loss of Pear Limited, Salak Limited and Apricot Limited for the year ended December 31, 2017 were as follows: Pear Limited Salak Limited Apricot Limited S000 S000 S600 Revenue 28.000 22.000 25.000 Cost of sales (19,000) (2.000) (11,000 Gross profit 9,000 15.000 Other income 14,000 970 9.970 15.000 14,000 Distribution cost (800) (700) (600) Administration expenses (700) (600) (SOD) Other operating expenses (600) (500) (400 Profit before taxation 7,870 13.200 12,500 Taxation (500) (400) (300) Profit for the year 7.370 12,800 12.200 Drall statements of financial position of Pear Limited, Salak Limited and Apricot Limited as at December 31, 2017 were as follows: Pear Limited SIXIO Salak Limited S000 Apricot Limited S000 50.000 15,500 Non-current assets Property, plant and equipment Investment in Salak Limited Investment in Apricot Limited Long-term loan to Pear Limited 17,200 38,000 2.100 600 Current assets Inventories Cash Total assets 9.500 7,370 74,170 9,000 9,400 68,400 8.800 6.800 31,700 Share capital Retained profits Total equity 35.000 37,370 72,370 30,000 37,900 67.900 4,000 26,700 30,700 600 Long-term loan from Apricot Limited 700 500 1.800 74,170 Accounts payable Tax payable Total liabilities Total equity and liabilities 300 200 500 68.400 600 400 1,000 31,700 ACT 407F (1704) 600 *NO D 46+ ...11 36 21 67% 9 16:22 2020-06-25 15.... E a Required: Question 1 (35 marks) (a) Prepare the consolidated statement of profit or loss for Pear Group for the period ended December 31, 2017 (15 marks) (b) Prepare the consolidated statement of financial position for Pear Group as at December 31, 2017 (20 marks) Question 2 (15 marks) (a) Prepare the group related party disclosures for the related party relationship and related party transactions in the consolidated financial statements of Pear Group as at December 31, 2017 (8 marks) (b) Prepare the group related party disclosures for the key management personnel compensation in the consolidated financial statements of Pear Group is at December 31, 2017 (7 marks) END OF SECTIONAL Page 5 of 11 ACT B407F (1704)