QUESTION 1 (35 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.

	TITAN Bhd. (in RM)	CIMA Bhd. (in RM)
Revenue	14,000,000	6,000,000
Cost of sales	(7,000,000)	(3,500,000)
Gross profit	7,000,000	2,500,000
Other income: Gain on sale property Loss on sale equipment	150,000 -	- (50,000)
Selling and distribution expenses	(2,100,000)	(700,000)
Administrative and other operating expenses	(2,850,000)	(1,190,000)
Profit from operations	2,200,000	560,000
Finance costs	(200,000)	(60,000)
Profit before tax	2,000,000	500,000
Income tax	(250,000)	(100,000)
Profit after tax	1,750,000	400,000
Other comprehensive income: Surplus on property revaluation	250,000	100,000
Total comprehensive income	2,000,000	500,000

The followings are the Statements of Financial Position as at 30 June 2020 for TITAN and CIMA.

	TITAN Bhd. (in RM)	CIMA Bhd. (in RM)
Property, plant and equipment	12,000,000	6,000,000
Investment property	2,000,000	-
Investment in CIMA	4,500,000	-
Current assets
Inventory	1,200,000	400,000
Trade and other receivables	488,000	60,000
Cash and cash equivalents	642,000	200,000
TOTAL ASSETS	20,830,000	6,660,000
Equity
Equity attributable to owners of the parent 2,000,000 units 1,000,000 units	6,000,000	2,500,000
Retained earnings	10,330,000	2,900,000
Revaluation reserve	250,000	100,000
Non-controlling interest
Non- current liabilities
Loan from bank	4,000,000	1,000,000
Current liabilities
Trade payables	150,000	60,000
Loan from bank	100,000	100,000
TOTAL EQUITIES AND LIABILITIES	20,830,000	6,660,000

Additional information:

1. 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.
2. 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.
3. One 25 June 2019, CIMA sold one of its equipment to TITAN at loss of RM50,000.
4. Trade receivables of TITAN include RM40,000 due from CIMA.
5. All profits are assumed to accrue evenly throughout the year and there is no impairment on consolidated goodwill.
6. 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.

(3 marks)

(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)

(f) Prepare the Statement of Financial Position as at 30 June 2020 for TITAN Bhd. and the Group.

(10 marks)