QUESTION 1 (25 Marks)

A. Detail of the Statement of Financial Position and Consolidated Statement of Comprehensive Income relates to Karmila Co, a production company for the year ended 31 December 2019.

Statement of Financial Position as at 31 December 2019

20192018

RM'000 RM'000

Cash and cash balances360250

Short-term investments430280

Receivables570430

Inventories450500

Associated companies980780

Goodwill on combination450500

Property, plant and equipment1,7601,060

5,0003,800

Payables450500

Taxation360400

Deferred taxation170200

Unsecured loan stocks200400

Non-controlling interest320150

Contributed share capital1,9001,200

Revaluation reserves300100

Retained profit1,000650

Proposed dividends300200

5,0003,800

Consolidated Statement of Comprehensive Income & Retained Profits

For the year ended 31 December 2019

RM'000RM'000

Group's profit before taxation880

After charging/(crediting):

Depreciation250

Goodwill impairment loss50

Interest expense40

Interest income(20)

Gain on sale of property, plant and equipment(50)

Add: Share of profits in associates300

Profit before taxation1,180

Taxation: Group (includes a transfer of RM30,000.00

deferred tax (330)

Profit after taxation850

Other comprehensive income:

Revaluation surplus of property, plant and equipment200

Total comprehensive income1,050

Movements in Retained Profits:

Profit attributable to non-controlling interest200

Profit attributable to owners of the parent650

Retained profits brought forward650

Proposed dividends-current year (300)

Retained profits carried forward1,000

Additional Information

a.During the year, some property, plant and equipment with a net book value of RM100,000.00 were sold for RM150,000.00 cash. Some properties were revalue upward by RM200,000.00 and the surplus credited to revaluation reserves.

b.Equity accounting is applied for investments in associates. Dividends (net) received from associates during the year totalled RM100,000.00.

c.Dividends paid by subsidiaries to non-controlling shareholders totalled RM30,000.00.

d.Short-term investments are marketable money market securities and are part of the company's cash management.

e.The proposed dividends of the parent company are included as a component of equity in the statement of financial position.

REQUIRED:

Using the indirect method, present the Consolidated Statement of Cash Flows of Karmila Bhd. for the year ended 31 December 2019.

[20 marks]

B. After two years of business, the Camelia Ladder Company decided to apply for a bank loan to finance a new store. Although the company had been successful, it had never prepared a cash budget. The owner of Camelia Ladder Company used the information from the first two years of business to reconstruct cash forecast, and he presented them with his financial statements as though they had been prepared as part of the company's planning.

REQUIRED:

Do you think this behaviour was ethical? What would you do in similar circumstances? Why?