QUESTION 1

Alor Bhd has been in business selling high quality furniture for kitchen, living room and bathroom in Melaka. After almost 25 years in this furniture business, the company faced stiff competition from China. However, the company went ahead with new idea to survive and passionate about being the most affordable furniture store in Malaysia.

1 July 2016

The board of directors decided to embark a new business model by aggressively focusing on design, build and custom furniture. The company new mission is to be a lifestyle industrial design, which creates classically inspired leather, wood and metal product. Due to that, Alor Bhd made 100% investments in Gajah Bhd and Lendu Bhd, both supplying wood and metal components including solid wood flooring, solid timber flooring and total roofing work. Alor Bhd foresees the potential of both new established companies which strategically located in the same vicinity of Alor Bhd. These acquisitions Alor Bhd to increase its company market share and reduce the company overall operating costs. The consideration transferred paid were equal to the fair value of the net assets of Gajah Bhd and Lendu Bhd.

1 July 2019

Kelemak Bhd was previously a rival company of Alor Bhd. Despite numerous economic downturns, the development of Kelemak Bhd outperforms Alor Bhd. Acknowledging that Kelemak Bhd may pose threat to Alor Bhd, the company acquired 60% of ordinary shares of Kelemak Bhd at a market price of RM2 each. The total consideration comprises of 90% cash and the remaining 10% in the form of Alor Bhd's 6% Preference Shares. However, only cash transaction has been recorded.

The total fair value of the net assets of Kelemak Bhd was RM88 million and included in this amount was a fair value adjustment of Kelemak Bhd's non-depreciable land. This adjustment, however, has not been recorded. During the post-acquisition period, Kelemak Bhd has not issued any new shares.

1 January 2020

Alor Bhd decided to further acquire 20% of the ordinary shares in Kelemak Bhd for RM20 million cash.

On the same day, Alor Bhd acquired 30% of the ordinary shares of Melekek Bhd at RM15 million. For the year ended 30 June 2020, Melekek Bhd generates a profit of RM4 million.

The following information was taken from the books of Alor Bhd and its group:

m m Statement of Changes in Equity for the year ended 30 June 2020 Share Capital Other Reserves Retained Prots RM million RM million RM million Balance bid 400 30 218 Net Prot 1?.7 Dividend {7.7) Balance. old 4011 _30_ 228_ Gajah 5110. Statement of Changes in Equity for the year ended 30 June 2020 Share Capital Other Reserves Retained Prots RM million RM million RM million Balance bid 150 20 95 Net Prot 6 Dividend - Balance. dd 15!} _20_ 1.0_1_ mm Statement of Changes in Equity for the year ended 30 June 2020 Share Capital Other Reserves Retained Prots RM million RM million RM million Balance bid 100 14 25.5 Net Prot 30.5 Dividend (preference dividend {6) and ordinary dividend) Balance old 100 M- 5_0_ mum Statement of Changes in Equity for the year ended 30 June 2020 Share Capital Other Reserves Retained Prots RM million RM million RM million Balance bid 50 8 22 Net Prot 3.8 Dividend {0.8) Balance. old 51} 8 25 Statements of Financial Position as at 30 June 2020 Alor Gajah Lendu Kelemak Bbd Bbd Bhd Bhd RM RM RM RM million million million million Property, Plant and Equipment 179 226 97 50 Investment in Gajah Bbd 150 Investment in Lendu Bud 100 Investment in Kelemak Bud 74 Investment in Melekek Bud 15 Other investment 110 41 100 30 Intangibles 11 20 6 40 Trade Receivables 20 7 22 12 Other Current Assets 26 20 17 10 585 314 242 142 6% Preference shares 50 Ordinary shares: 400 150 million units in Gajah Bud 150 100 million units in Lendu Bud 100 50 million units in Kelemak Bud 50 Retained profits 228 101 50 25 Other reserves 30 20 14 8 Long-term Loan 30 4 50 Current Liabilities 27 13 24 9 685 314 242 142 Statements of Profit or Loss and and Other Comprehensive Income for the year ended 30 June 2020 Alor Gajah Lendu Kelemak Bhd Bbd Bhd Bhd RM RM RM RM million million million million Revenue 42 40 72 26 Cost of sales (15) (16) (18) (13) Gross Profit 27 24 54 13 Gain on disposal 5 1 Investment income 5.4 2 5.7 0.3 Expenses 14.8) (18) (20) (8.3) Profit before taxation 22.6 8 40.7 (2 ) 5 Taxation (4.9) (10.2) (1.2) Net Profit 17.7 6 30.5 3.8