Preparetheconsolidatedstatement statementof financial positionof PgroupfortheyearendDec312018 Section A (50 marks) This section is COMPULSORY. Answer Pupfish Limited is a company incorporated in Hong Kong. Its main business is the Pupfish Limited had long-term equity investments in two companies. The information about the acquisition of the issued Pupfish Limited has a policy of accounting for non-controlling interest using net Anglerfish Limited 2004 Hong Kong Date of incorporation January 2, 2017 Location of incorporation 35% Acquisition date $4,800,000 Percentage of shares acquired $8,000,000 Purchase consideration $5,000,000 Issued share capital at acquisition date Retained profits at acquisition date assets approach. At the date of acquisition, the carrying amounts of all identifiable assets and liabilities of Spiderfish Limited were equal to their fair values, except for a The fair value of the piece of piece of equipment owned by Spiderfish Limited. The equipment had a equipment was $800,000 in excess of its carrying amount. remaining useful life of 4 years. This revaluation was not reflected in the books of Spiderfish Limited In relation to the acquisition of Spiderfish Limited, the consolidated goodwill was not impaired at December 31, 2018. Spiderfish Limited paid dividend of $500,000 on December 15, 2018. fresh and canned pupfish shares of the two companies was as follows: Spiderfish Limited 2003 Hong Kong January 2, 2016 60% $30,000,000 $25.000.000 $18,000,000 There has been no change in the issued share capital of Anglerfish Limited since the acquisition by Pupfish Limited. No goodwill was recorded in the acquisition of Anglerfish Limited Pupfish Limited, Spiderfish Limited and Anglerfish Limited adopted historical cost model to account for their non-current assets and depreciated their non-current assets on a straight-line basis. The depreciation expense was included in other operating expenses. Pupfish Limited, Spiderfish Limited and Anglerfish Limited have their year end at December 31. Additional information: Pupfish Limited owned a machine with a purchase price of $900,000. In the books of Pupfish Limited, the accumulated depreciation of the machine was $600,000. On January 2, 2018, Pupfish Limited sold the machine to Spiderfish Limited at a price of $500,000. At the transaction date, the remaining useful life 2. 3. of the machine was five years. Anglerfish Limited sold goods to Pupfish Limited during 2018 The selling price and the cost of sales were $900,000 and $500,000, respectively. At year end, the percentage of unsold goods in the books of Pupfish Limited was 10%. During 2018, Pupfish Limited sold goods to Anglerfish Limited. The selling price invoiced by Pupfish Limited to Anglerfish Limited was $1,000,000 with a cost plus 25%. 20% of the goods were in the inventory record of Anglerfish Limited at year end. Draft statements of financial position of Pupfish Limited, Spiderfish Limited and Anglerfish Limited as at December 31, 2018 were as follows: Pupfish Spiderfish Limited Limited $'000 $'000 Anglerfish Limited $'000 52.000 35,900 Non-current assets Property, plant and equipment Investment in Spiderfish Limited Investment in Anglerfish Limited Long-term loan to Pupfish Limited 20.000 30.000 4.800 900 Current assets Inventories Cash Total assets 8,000 7.900 70.700 7,000 9,300 68,300 9,000 8.000 53.800 Share capital Retained profits Total equity 30,000 38,500 68,500 25,000 41,600 66,600 8.000 44,600 52,600 900 Long-term loan from Anglerfish Limited Accounts payable Tax payable Total liabilities Total equity and liabilities 900 400 2,200 70,700 800 900 1,700 68,300 700 500 1,200 53,800 Draft statements of profit or loss of Pupfish Limited, Spiderfish Limited Anglerfish Limited for the year ended December 31, 2018 were as follows: In the last director meeting of Pupfish Limited held on December 14, 2018, the chief executive officer of Pupfish Limited proposed a plan to decrease the equity interest of chairperson of Pupfish Limited had a query about the difference in accounting and Pupfish Limited $ 000 32.000 (23.000) 9,000 Spiderfish Limited $'000 28.000 (11.000) 17.000 Anglerfish Limited $'000 30.000 (14,000) 16.000 500 Revenue Cost of sales Gross profit Other income 16,000 (200) (300) 17,000 (500) (700) (800) 15,000 (900) 14.100 (400) 9.500 (900) (800) (700) 7.100 (600) 6,500 Distribution cost Administration expenses Other operating expenses Profit before taxation Taxation Profit for the year 15.100 (500) 14,600 The Anglerfish Limited from the original shareholding percentage to 10%. treatments for Anglerfish Limited before and after the proposed change in the shareholding percentages. The chief executive officer suggested making a reply in the next director meeting on January 15, 2019. Required: Question 1 (35 marks) (a) Prepare the consolidated statement of profit or loss for Pupfish Group for the year ended December 31, 2018. (15 marks) (b) Prepare the consolidated statement of financial position for Pupfish Group as at December 31, 2018 (20 marks) Question 2 (15 marks) Advise the chief executive officer about the difference in accounting treatments for Anglerfish Limited due to the proposed change. Preparetheconsolidatedstatement statementof financial positionof PgroupfortheyearendDec312018 Section A (50 marks) This section is COMPULSORY. Answer Pupfish Limited is a company incorporated in Hong Kong. Its main business is the Pupfish Limited had long-term equity investments in two companies. The information about the acquisition of the issued Pupfish Limited has a policy of accounting for non-controlling interest using net Anglerfish Limited 2004 Hong Kong Date of incorporation January 2, 2017 Location of incorporation 35% Acquisition date $4,800,000 Percentage of shares acquired $8,000,000 Purchase consideration $5,000,000 Issued share capital at acquisition date Retained profits at acquisition date assets approach. At the date of acquisition, the carrying amounts of all identifiable assets and liabilities of Spiderfish Limited were equal to their fair values, except for a The fair value of the piece of piece of equipment owned by Spiderfish Limited. The equipment had a equipment was $800,000 in excess of its carrying amount. remaining useful life of 4 years. This revaluation was not reflected in the books of Spiderfish Limited In relation to the acquisition of Spiderfish Limited, the consolidated goodwill was not impaired at December 31, 2018. Spiderfish Limited paid dividend of $500,000 on December 15, 2018. fresh and canned pupfish shares of the two companies was as follows: Spiderfish Limited 2003 Hong Kong January 2, 2016 60% $30,000,000 $25.000.000 $18,000,000 There has been no change in the issued share capital of Anglerfish Limited since the acquisition by Pupfish Limited. No goodwill was recorded in the acquisition of Anglerfish Limited Pupfish Limited, Spiderfish Limited and Anglerfish Limited adopted historical cost model to account for their non-current assets and depreciated their non-current assets on a straight-line basis. The depreciation expense was included in other operating expenses. Pupfish Limited, Spiderfish Limited and Anglerfish Limited have their year end at December 31. Additional information: Pupfish Limited owned a machine with a purchase price of $900,000. In the books of Pupfish Limited, the accumulated depreciation of the machine was $600,000. On January 2, 2018, Pupfish Limited sold the machine to Spiderfish Limited at a price of $500,000. At the transaction date, the remaining useful life 2. 3. of the machine was five years. Anglerfish Limited sold goods to Pupfish Limited during 2018 The selling price and the cost of sales were $900,000 and $500,000, respectively. At year end, the percentage of unsold goods in the books of Pupfish Limited was 10%. During 2018, Pupfish Limited sold goods to Anglerfish Limited. The selling price invoiced by Pupfish Limited to Anglerfish Limited was $1,000,000 with a cost plus 25%. 20% of the goods were in the inventory record of Anglerfish Limited at year end. Draft statements of financial position of Pupfish Limited, Spiderfish Limited and Anglerfish Limited as at December 31, 2018 were as follows: Pupfish Spiderfish Limited Limited $'000 $'000 Anglerfish Limited $'000 52.000 35,900 Non-current assets Property, plant and equipment Investment in Spiderfish Limited Investment in Anglerfish Limited Long-term loan to Pupfish Limited 20.000 30.000 4.800 900 Current assets Inventories Cash Total assets 8,000 7.900 70.700 7,000 9,300 68,300 9,000 8.000 53.800 Share capital Retained profits Total equity 30,000 38,500 68,500 25,000 41,600 66,600 8.000 44,600 52,600 900 Long-term loan from Anglerfish Limited Accounts payable Tax payable Total liabilities Total equity and liabilities 900 400 2,200 70,700 800 900 1,700 68,300 700 500 1,200 53,800 Draft statements of profit or loss of Pupfish Limited, Spiderfish Limited Anglerfish Limited for the year ended December 31, 2018 were as follows: In the last director meeting of Pupfish Limited held on December 14, 2018, the chief executive officer of Pupfish Limited proposed a plan to decrease the equity interest of chairperson of Pupfish Limited had a query about the difference in accounting and Pupfish Limited $ 000 32.000 (23.000) 9,000 Spiderfish Limited $'000 28.000 (11.000) 17.000 Anglerfish Limited $'000 30.000 (14,000) 16.000 500 Revenue Cost of sales Gross profit Other income 16,000 (200) (300) 17,000 (500) (700) (800) 15,000 (900) 14.100 (400) 9.500 (900) (800) (700) 7.100 (600) 6,500 Distribution cost Administration expenses Other operating expenses Profit before taxation Taxation Profit for the year 15.100 (500) 14,600 The Anglerfish Limited from the original shareholding percentage to 10%. treatments for Anglerfish Limited before and after the proposed change in the shareholding percentages. The chief executive officer suggested making a reply in the next director meeting on January 15, 2019. Required: Question 1 (35 marks) (a) Prepare the consolidated statement of profit or loss for Pupfish Group for the year ended December 31, 2018. (15 marks) (b) Prepare the consolidated statement of financial position for Pupfish Group as at December 31, 2018 (20 marks) Question 2 (15 marks) Advise the chief executive officer about the difference in accounting treatments for Anglerfish Limited due to the proposed change