Question 1 , Question 2 and Question 5 part (ii) thanks alot

Faculty of Business, Economics & Accounting Department of Accounting and Finance HELP Bachelor of Business (Hons) Year 3 INTERNAL SUBJECT DETAILS Semester 3, 2015 Subject: ACC 302 Corporate Accounting Subject Lecturer/Tutor: Dr Ben Yap Telephone: +603 2711 2968 Email: ben.yap@help.edu.my Consultation: Please call or email for appointment PRE-REQUISITE(S) ACC202 LAW201 FINANCIAL REPORTING & COMPANY LAW SYNOPSIS ACC302 Corporate Accounting builds on the knowledge acquired from ACC101 Financial Accounting 1, ACC203 Financial Accounting 2, ACC200 Accounting Systems, ACC202 Financial Reporting and LAW201Company Law. This subject requires students to consider the role of accounting in conveying a company's economic performance. This subject is designed to enable students to acquire basic skills of corporate accounting. Topics covered include the application of accounting entries for company incorporation; accounting for branches; insolvency; deferred taxation; restructuring of companies; group accounting; and other corporate combinations. On completing this subject students should be knowledgeable of a large proportion of the accounting and reporting requirements that pertain to corporations. OBJECTIVES Upon completion of this subject, students should be able to: understand the procedures and be able to demonstrate the accounting entries for company incorporation, restructuring, dissolution and winding up; demonstrate a detailed knowledge of the relevant accounting standard and the statutory reporting requirements for deferred taxation; be able to prepare financial statements for a group of companies where there is 100% control and where outside equity interest is involved; be able to translate financial statements of foreign operations in readiness for consolidation; prepare a consolidated statement of cash flows, including accompanying notes for a parent and its controlled entities, and understand the financial report disclosures for investments in associates, joint ventures and foreign operations. 2 TOPICS Topic 1 Accounting for Company Incorporation - Owners Equity and Earnings Per Share Topic 2 Presentation of Financial Statements, Asset Impairment Topic 3 Deferred Taxation Topic 4 Accounting for Trustee Holders, Dissolution and Winding Up Topic 5 Accounting for Restructuring, Takeovers and Mergers Topic 6 Group Accounts: Basic principles Topic 7 Group Accounts: Inter-entity eliminations Topic 8 Group Accounts: Minority Interest Topic 9 Consolidated Statement of Cash Flows Topic 10 Accounting for Corporate Combinations: Associates, Joint Ventures Group Accounts Topic 11 Effects of Foreign Exchange Transactions - foreign operations, consolidation PRESCRIBED TEXTS Leo, K., Hoggett, J., Sweeting, J. and Radford, J. (2015) Company Accounting in Australia, 10th edn, John Wiley & Sons. Lazar, J. and Tan, L.L. (2010) Company and Group Accounting & Reporting, 7th edn, Pearson Education (this is the latest edition) Latest editions of the relevant MASB standards issued by the Malaysian Accounting Standards Board RECOMMENDED REFERENCES Tan, L. T.(2011) Consolidated Financial Statements, 6th edn, CCH Tan, L.T.(2012) Financial Accounting and Reporting in Malaysia (Volume One), 4th edn, CCH 3 Subject Outline / Teaching Plan Department Lecturer : Accounting & Finance : Dr Ben Yap Week Subject Code : ACC 302 Subject Title : Corporate Accounting Topics References 1 Topic 1: Accounting for Company Incorporation - Owners Equity and Earnings Per Share Chap 1 & 2 2 Topic 2: Presentation of Financial Statements, Asset Impairment Refer to ACC 203 3 Topic 3: Deferred taxation Chap 6 4 Topic 6: Group Accounts: Basic principles Chap 18 & 19 5 Topic 6: Goodwill BCVR entries Chap 18 & 19 6 Topic 7: Intercompany eliminations Chap 20 7 MID-TERM & BREAK 8 Topic 8: Non-controlling interest Topic 8: Noncontrolling interest 9 Topic 9: Consolidated Statement of Cash flows 10 Topic 10&4: Accounting for Associate & Changes in Business structures Chap 12 11 Topic 5: Accounting for Restructuring - Internal & External Re organisation To be confirmed later 12 Topic 11 & 6: Effects of Foreign Exchange Transactions - Foreign operations, consolidation & Entity theory To be confirmed later 13 Topic 4: Accounting for Trustee Holders, Dissolution To confirm and Winding Up later 14 REVISION 15 - 16 Chap 21 To be confirmed later FINAL EXAMINATION Textbook: Leo, K., Knapp, J., McGowan S., & Sweeting, J. Accounting, 10th edn, John Wiley & Sons. 4 (2015) Company ASSESSMENT: Assessment Items Value Due Date 1. Assignment 15% 13 November 2015 2. Mid Semester Test 15% TBC 3. Final Examination (Closed Book) 70% Examination period: 7 December - 19 December 2015** REQUIREMENTS: To gain a pass in this subject, students must: Achieve a passing grade in the final examination i.e. score a minimum of 35 marks out of 70 marks if there is an examination for this subject. Attempt ALL areas of assessment; and achieve a total result of 50% or better overall. ** - Please check on the notice board and My Acel for the actual date. HELP University reserves the right to make any changes to the above where appropriate. 5 HELP UNIVERISITY ACC302 CORPORATE ACCOUNTING ASSIGNMENT Due on : 13 November 2015 Weightage : 15% INSTRUCTION(S): Assignment in this subject is compulsory. Failure to submit the assignment will result in automatic failure (FL) and students will not be eligible to sit for the final examination. Students are required to ensure that assignment should comply with the following instructions. Failure to do so would invite a penalty. 1. Assignments should be computer-typed, double-spaced, having a font size of 12, using Times New Roman. Hand-written assignments will not be accepted. There should be a one-inch margin on both sides of the page and all pages must be numbered accordingly. 2. Copying the work of others, allowing others to copy your work, and/or attempting to do any of the above mentioned will result in automatic failure of your submission. 3. Bibliographies are required for assignments. To avoid plagiarism, you should acknowledge all references used in completing the assignments. Bibliographies should appear at the end of the assignments. A 5% penalty will be applied for omission of bibliographies. Furthermore, marks will be deducted if bibliographies do not contain all required details. Study manual or lecture notes are not to be used as either references or authorities to support a stand taken. No excuses for acts of plagiarism will be entertained. 4. Extension for assignments will only be given to students facing unforeseen and unavoidable problems. Work and family commitments do not constitute sufficient reason for the granting of extensions. Request for an extension in writing must be submitted prior to the due date. Extensions will not be granted on or after the due date, including MC. Late assignments without an extension granted by the lecturer are subjected to a penalty of 10% per day. 5. Assignments must be submitted to the Faculty of Business, Economics & Accounting. Before submitting your assignment, you should make a copy and submit the original for assessment. 6. Need to submit the Turnitin Report, the username and the password for which can be collected from your lecturer. 7. Turnitin ID: Password: accounting 6 QUESTION Read the following newspaper article: Investor prepares for fight as Transurban issues shares Transurban's largest shareholder has failed in an eleventh-hour appeal to halt an allotment of newly-issued shares to institutional investors but will get a chance to air its grievances before the takeover's umpire. The Takeovers Panel yesterday rejected a request by the Sydney fund manager CP2 for interim orders similar to a temporary injunction seeking to halt the $542 million share issue. However, a panel will be appointed to consider the shareholder's application for final orders against the raising, which Transurban wants to use to pay for its $630 million purchase of Lane Cove Tunnel. The latest dispute between Transurban and its largest shareholder creates further instability for the toll-road company, and raises fears of a protracted stand-off. A day after Transurban's embattled chairman, David Ryan, attempted to quell a push for board scalps, CP2 went to the takeovers umpire saying the company's rights issue 'constitutes frustrating actions'. The fund manager, which owned just under 15 per cent of Transurban before the capital raising, joined two Canadian pension funds in unsuccessfully trying a $7.2 billion takeover offer for the toll-road group two weeks ago. CP2's stake will be diluted because it did not participate in the share issue. Yesterday CP2 said Transurban had conducted the rights issue in a 'misinformed market' and the timing of the sale precluded the Canadian-led consortium and overseas investors from participating. It wanted shareholders to be able to vote on the capital raising and, if it went ahead, the institutional entitlement offer to be reopened. However, this appears impractical given the new shares can be traded from today. Andrew Chambers, an Austock analyst, said there had been mixed messages from CP2 because it wanted the rights issue stopped while it was also seeking to reopen the institutional offer. 'There seems to be mixed objectives, which always create uncertainty for the stock', he said. Transurban and CP2 declined to comment yesterday because the matter was before the Takeovers Panel. However, Transurban said its capital raising was proceeding as planned. Shares in Transurban closed down 11c, at a seven-month low of $4.30. Source: Matt O'Sullivan, Sydney Morning Herald, 26 May 2010. 7 Required A. Distinguish between a rights issue and a private placement. B. From the above article, what appears to be the problem voiced by Transurban's largest shareholder against the share issue? 1. Turnitin report should be submitted along with the assignment. It should not be handed to the lecturer at a later date 2. Since this is a group assignment, extension of time is strictly not allowed 8 Assignment No.: __ Assignment Cover Sheet Student Information (For group assignment, please state names of all members) Name Grade/Marks ID Office Acknowledgement Module/Subject Information Module/Subject Code Module/Subject Name Lecturer/Tutor/Facilitator Due Date Assignment Title/Topic Intake (where applicable) Word Count Date/Time Declaration . I/We have read and understood the Programme Handbook that explains on plagiarism, and I/we testify that, unless otherwise acknowledged, the work submitted herein is entirely my/our own. . I/We declare that no part of this assignment has been written for me/us by any other person(s) except where such collaboration has been authorized by the lecturer concerned. . I/We authorize the University to test any work submitted by me/us, using text comparison software, for instances of plagiarism. I/We understand this will involve the University or its contractors copying my/our work and storing it on a database to be used in future to test work submitted by others. Note:1) The attachment of this statement on any electronically submitted assignments will be deemed to have the same authority as a signed statement. 2) The Group Leader signs the declaration on behalf of all members. Signature: Date: mail: 9 Feedback/Comments* Main Strengths Main Weaknesses Suggestions for improvement Student acknowledge feedback/comments Grader's signature Student's signature: Date: Date: Note: 1)A soft and hard copy of the assignment shall be submitted. 2)The signed copy of the assignment cover sheet shall be retained by the marker. 3)If the Turnitin report is required, students have to submit it with the assignment. However, departments may allow students up to THREE (3) working days after submission of the assignment to submit the Turnitin report. The assignment shall only be marked upon the submission of the Turnitin report. *Use additional sheets if required. 10 Department of Accounting & Finance ACADEMIC INTEGRITY Honesty and Responsibility Academic integrity is an important tenet for HELP University. In pursuit of the highest standards of academic integrity, the Department of Accounting & Finance holds it students to the highest ethical standards defined by the Rules and Regulations section of the Academic Handbook. All students at the Department of Accounting & Finance are subjected to and are bound by the Student Academic Misconduct Rule to assure academic honesty. Students are required to sign a pledge on the assignment cover sheet before submitting your assignments to the Administration Office of the Faculty of Business, Economics & Accounting. What is Plagiarism? Plagiarism is academic dishonesty or academic theft, and it is a serious academic offence. Plagiarism includes, but is not limited to, the followings: 1. quote, paraphrase or summarize someone else's ideas, theories or data, in whole or in part, without appropriate acknowledgement 2. borrow ideas, opinion or words, in whole or in part, from other sources without properly crediting the author(s) 3. use any facts, statistics, diagrams or graphs, in whole or in part, without acknowledging the source clearly 4. claim or imply original authorship of someone else's ideas, theories or data, in whole or in part, as your own 5. employ or allow someone to help to revise, amend or write your work and pass off as your own original work 6. collaborate with or allow other students to copy your work 7. draw on sources more than what you have acknowledged by citations While a student is not discouraged to discuss an assignment with his/her friends or classmates, the work he/she submits must be done by the student alone. If a student shares his/her assignment with other students and they plagiarize it, the student is as guilty as those students who plagiarized his/her assignment. All parties to plagiarism are considered equally guilty. Under no circumstances should a student be involved in collusion with other students unless he/she is permitted to work on an assignment jointly by the lecturer/tutor. If a student is unsure what constitutes plagiarism, he/she is obliged to consult the lecturer/tutor on the matter before submission of his/her assignment. When and How to Reference? Knowing when and how to cite is a student's responsibility. If he/she is in doubt or need more help on this matter, the student may consult the lecturer/tutor. The following list comprises some of the sources a student will need to reference. The list is by no means exhaustive, but simply consists of the most common sources used by students to complete their work. 1. Books 11 2. 3. 4. 5. 6. 7. 8. Chapters in books Journal articles Conference papers Newspaper articles Magazines Websites Study guide Students are advised to cite in the following cases [1]: 1. When he/she quotes two or more words verbatim, or even one word if it is used in a way that is unique to the source 2. When he/she introduce facts that he/she have found in a source 3. When he/she paraphrase or summarize ideas, interpretations, or conclusions that he/she find in a source 4. When he/she introduce information that is not common knowledge or that may be considered common knowledge in your field, but the reader may not know it 5. When he/she borrow the plan or structure of a larger section of a source's argument (for example, using a theory from a source and analyzing the same three case studies that the source uses) 6. When he/she build on another's method found either in a source or from collaborative work in a lab 7. When he/she build on another's program in writing computer code or on a notcommonly-known algorithm 8. When he/she collaborate with others in producing knowledge In general, a referencing system requires two parts: 1. In-text citations This is information about a source within the text of an assignment. 2. List of references This is a list of all sources a student has used to research his/her assignment. It is alphabetically arranged by author surname and appears immediately after the last page of an assignment. Different faculties or departments may have different requirement on how referencing for an assignment should be done. The various formats used for in-text citations and list of references are available in the following websites: 1. Harvard System (http://www.adelaide.edu.au/library/guide/gen/harvard.html) 2. Chicago Style (http://www.chicagomanualofstyle.org/index.html) 3. American Psychological Association or APA Style (http://www.apastyle.org) 4. Modern Language Association of America or MLA Style (http://www.mla.org) Once a student has selected a referencing style for his/her assignment, he/she must follow the same style consistently throughout the assignment. We strongly suggest that the student consults the lecturer/tutor about which method to use before submission of his/her assignment. 1 http://www.yale.edu/bass/writing/sources/plagiarism/warning.html, accessed May 18, 2008. 12 What are the Procedures and Penalties for Plagiarism? When a lecturer/tutor encounters a possible case of plagiarism, the lecturer/tutor shall report the matter to the Head of the Department, who then initiates an investigation on the matter. The following procedures would be carried out: 1. The lecturer/tutor shall provide evidence that substantiates an academic offence has occurred. The following documentations must be ready prior to reporting of alleged plagiarism: a. Copy of the alleged plagiarized assignment b. Copy of the source material (e.g. articles, websites, newspaper, etc.) c. Report of plagiarism d. Any other information that would support the claim of plagiarism 2. If the evidence warrants an accusation of academic offence, the Head of Department shall establish a Board of Inquiry comprising 3 academic staff. The Department shall provide all necessary documentations, including report on prior academic offences if applicable, to the Board of Inquiry. 3. The Board of Inquiry shall put the matter to the student in writing and give him/her an opportunity to respond to the accusation within 3 working days. 4. The student will be required to attend a meeting with the Board of Inquiry. After meeting the student, the Board of Inquiry shall decide whether or not the alleged plagiarism has occurred. The following documentations shall be submitted to the Head of Department at the end of the meeting: a. Findings of the investigation b. Recommended action(s) to be taken or imposed 5. The Head of Department shall review the Board of Inquiry's report with supporting evidence and shall decide on an appropriate action(s) based on the recommendation of the Board of Inquiry. 6. The decision of the Head of Department shall be put in writing to the student. Copies of all documentations will be retained in the Department. 7. If the student feels that he/she has been unfairly accused or treated, the student may appeal to the Head of Department within 5 working days. 8. The Head of Department shall review the appeal and the final decision will be communicated to the student in writing and a copy will be kept with the Department. Once a determination of plagiarism and penalty has been made by the Head of Department, the investigative process will be deemed to have ended and the student will not be allowed to appeal. Possible penalties for plagiarism range from mark reduction for the assignment to expulsion from the University. The student will not be allowed to make up the assignment. If plagiarism has been found to have occurred, the Department will take action(s) as determined by the forms of plagiarism implicated: 1. Complete plagiarism Verbatim copying another person's work without acknowledgement 1st offence : A grade of \"F\" in the subject and a warning letter will be issued 2nd offence : Expulsion from the University at the discretion of the Head of Department 2. Substantial plagiarism Near-verbatim copying another person's work by simply altering the order of the sentences or the format of presentation or by changing a few words or phrases without acknowledgement. 13 1st offence : Zero mark on the assignment and a warning letter will be issued nd 2 offence : A grade of \"F\" in the subject and a warning letter will be issued 3rd offence : Expulsion from the University at the discretion of the Head of Department 3. Minimal plagiarism Acknowledgement is made but paraphrasing by changing and/or eliminating some words 1st offence : Deduction of 50% of available marks on the assignment and a warning letter will be issued nd 2 offence : A grade of \"F\" in the subject and a warning letter will be issued 3rd offence : Expulsion from the University at the discretion of the Head of Department 4. Unintentional plagiarism Insufficient acknowledgement by not applying citation or quotation marks correctly 1st offence : Deduction of up to 50% of available marks on the assignment and a warning letter will be issued nd 2 offence : A grade of \"F\" in the subject and a warning letter will be issued rd 3 offence : Expulsion from the University at the discretion of the Head of Department Pleading ignorance or unintentional plagiarism does not constitute valid reasons for plagiarism and will not avoid the penalties from being imposed. Excuses for acts of plagiarism such as the following, but not limited to, will not be entertained: 1. I don't have time to do the assignment 2. I have too many assignments due on the same day 3. I don't know, I really didn't do it 4. I am not aware 5. I don't understand what plagiarism means 6. I have no intention to plagiarize 7. I forgot to cite the reference 8. I forgot to include the bibliography 9. My English is not good 10. My lecturer/tutor did not explain to me 11. In my country, it is alright to copy someone else's work 12. My friend copied my assignment when I let him/her to look at my assignment 13. My friend copied my assignment when I allow him/her to use my laptop 14. I did my assignment in the computer lab, someone must have copied my work 15. I asked my friend to submit my assignment and he/she copied my work 16. I discussed my assignment with my friends, so our answers are the same/similar 17. Even though I do not have in-text citation but I have bibliography/reference list Students should be reminded that it is their responsibilities to take due care throughout their written work to effectively reference or cite when they use others' ideas from any source. 14 DEPARTMENT OF ACCOUNTING & FINANCE SEMESTER X, 20XX SAMPLE FINAL EXAMINATION Subject Code : ACC302 Subject Name : CORPORATE ACCOUNTING This examination carries 70% of the total assessment for this subject. Examiner(s) MS ABC Day MR XYZ : Date Moderator(s) : Time Time allowed : : Reading - 10 MINUTES Writing - 3 HOURS INSTRUCTION(S): 1. This examination consists of TWO (2) sections: SECTION A - COMPULSORY question. Answer the question in the answer book provided. SECTION B - Answer any THREE (3) out of FOUR (4) questions in the answer book provided. 2. Writing in the examination answer book is NOT permitted during reading time. 3. This is a CLOSED BOOK examination. 4. Students are NOT permitted to retain this examination paper. 5. Students MUST pass this examination in order to pass the subject. (This examination paper consists of 2 sections in XX printed pages, including cover page) 15 SECTION A (25 Marks) Question 1 in this section is Compulsory. QUESTION 1 On 1 July 2016, Fur Ltd acquired 75% of the shares of Seal Ltd for $191 000 when the equity of Seal Ltd consisted of $120 000 share capital and $90 000 retained earnings. At this date, all the identifiable assets and liabilities of Seal Ltd were recorded at amounts equal to their fair values except for: Inventory Land Machinery (cost $68 000) Carrying amount $20 000 80 000 48 000 Fair value $26 000 110 000 57 000 Note the following in relation to these assets: All the inventory was sold by 30 June 2017. The land was revalued in the records of Seal Ltd immediately after the business combination. It was subsequently sold by Seal Ltd on 1 June 2018 for $113 000. At this date, the recorded gains on this land taken to other comprehensive income were $3000, the land being revalued to fair value by Seal Ltd immediately prior to sale. The machinery was considered to have a further useful life of 3 years. The fair value of the non-controlling interest in Seal Ltd at 1 July 2016 was $63 000. Fur Ltd uses the full goodwill method. The following annual results were recorded by Seal Ltd following the business combination: Year ended 30 June 2017 30 June 2018 30 June 2019 30 June 2020 Profit/(loss) $15 000 34 500 (9000) 33 000 Other items of comprehensive income $ 3 000 7 500 10 500 4 000 The other items of comprehensive income relate to gains/(losses) on the revaluation of land which is measured at fair value in the records of Seal Ltd. The group transfers the valuation reserves to retained earnings when an asset is sold or fully consumed. The tax rate is 30%. Required: Prepare the consolidation worksheet entries for the preparation of consolidated financial statements of Fur Ltd for each of the years ending 30 June 2016-20. 16 SECTION B (51 Marks) Answer any THREE (3) questions of this section. All questions carry a equal weightage of 17 Marks. QUESTION 2 The accounting profit before tax of Bluebell Ltd for the year ended 30 June 2009 was RM817,000. The following items of income and expense were included in the determination of the accounting profit. Account (Tax treatment) RM Impairment of goodwill (not tax deductible) 107,500 Entertainment expenses (not tax deductible) 43,000 Insurance expense (deductible when paid) 69,338 Depreciation of plant & equipment 236,500 Depreciation of motor vehicles 154,800 Doubtful debts expense (deductible when written off) 69,875 Long service leave expense (deductible when paid) 58,050 Government grant (exempt from tax) 82,000 Rent revenue (taxable when cash received) 284,000 Bluebell Ltd's statement of financial position as at 30 June 2008 and 2009 included: 2009 (RM) 2008 (RM) 82,000 90,000 680,000 712,000 2,795,000 2,526,250 182,750 204,250 Prepaid insurance 18,275 30,100 Rent receivable 55,000 49,500 ? 36,550 2,365,000 2,365,000 440,750 204,250 1,032,000 1,032,000 Accumulated depreciation 309,600 154,800 Goodwill (net) 430,000 537,500 65,575 69,875 ? 60,200 Cash Inventories Accounts receivable Allowance for doubtful debts Deferred tax asset Plant & equipment - at cost Accumulated depreciation Motor vehicles - at cost Provision for long service leave Deferred tax liability 17 Additional information: a) Plant and equipment is depreciated at 10% per annum on a straight-line basis for accounting purposes. The allowable rate for tax purposes is 15% per annum. b) Motor vehicles are depreciated at 15% per annum on a straight-line basis for accounting purposes. The allowable rate for tax purposes is 20% per annum. Required: i. ii. iii. Calculate the taxable profit for Bluebell Ltd (8 marks) Prepare a tax worksheet at 30 June 2009 to determine the movements in the deferred tax asset and liability accounts. (13 marks) Prepare the journal entries to record the current tax liability and the movements in the deferred tax asset and deferred tax liability accounts for the year ended 30 June 2009. (4 marks) 18 QUESTION 3 Teddy Bhd was incurring losses for the last four years and they resolved to carry out the scheme of capital reduction. The Ordinary shares of Teddy Bhd consists of 1,400,000 ordinary shares of RM1 each, fully paid up except for 20,000 shares and 600,000 8% Preference shares of RM1 each The following is the trial balance available for the year ending 31 December 2006 Debit RM'000 Ordinary shares of RM1 each 8% preference shares of RM1 each Accumulated loss Goodwill Accounts receivable Accounts payable Land and building Plant and Machinery Inventories Bills payable Bank Calls in arrears (20,000 ordinary shares of RM0.25) Credit RM'000 1,400 600 1,200 100 110 150 400 360 126 40 111 5 After all the statutory requirements were fulfilled the following scheme of capital reduction are to be carried out 1. The 20,000 ordinary shares, on which the calls are in arrears , are to be forfeited and cancelled 2. The remaining ordinary shares are to be reduced to 10 sen and then to consolidate the reduced ordinary shares into RM1 ordinary shares 3. The 8% preference shares are to accept 500,000 ordinary shares of RM 1 each in exchange 4. The accumulated losses and the Goodwill are to be written off 5. Land and Buildings are to be revalued to RM433,000, Inventories to RM100,000, Plant and Machinery to RM300,000 and Trade receivables to RM106.000 Required: i. a. b. c. d. e. Prepare the ledgers for Capital Reduction Bank, Ordinary share capital 8% Preference share capital. (8 Marks) (4 Marks) (3 Marks) (3 Marks) Prepare the Balance sheet of Teddy Bhd after the implementation of the reconstruction scheme. (7 Marks) 19 QUESTION 4 Cavill Ltd economic entity Consolidated profit and loss statement for year ended 30 June 2006 RM000 7,610 (3,140) 4,470 (650) (200) (620) 3,000 (1,350) Sates revenue Cost of sates Gross profit Operating expenses Goodwill amortisation Depreciation expense Profit from ordinary activities before tax Income tax expense Parent RM000 1,400 6,000 (400) 7,000 Profit from ordinary activities after tax Retained profits at 1.7.X5 Dividends paid Retained profits at 30.6.X6 Cavill Ltd economic entity Consolidated balance sheets at 30 June NCI RM000 250 300 (150) 400 1,650 6,300 (550) 7,400 2006 RM000 2005 RM000 7,900 9,150 1,300 18,350 7,000 1,500 7,100 1,000 16,600 4,400 1,350 5,750 12,600 4,000 1,100 5,100 11,500 5,000 7,000 5,000 6,000 200 400 12,600 200 300 11,500 Assets Non-current assets (net) Cash Accounts receivable Goodwill on acquisition (net) Liabilities Accounts payable and accruals Income tax payable Net Assets Shareholders' equity Parent entity interest Share capital Retained profits Outside equity interest Share capital Retained profits Total Equity 20 Additional information: On 1 July 2005 Cavill Ltd acquired all the issued shares of Orchid Ltd. The details of the acquisition are as follows RM000 Cost of acquisition Cash paid 1,500 Fair value of identifiable net assets at date of acquisition Non-current assets(net) 600 800 (400) 1,000 Difference - Goodwill on acquisition 500 REQUIRED i. Prepare the consolidated statement of cash flows of the Cavill Ltd for the year ended 30 June 2006. (19 Marks) ii. Show the relevant workings for Net cash flow from Operating activities. 21 (6 Marks) QUESTION 5 Part (i) On 30 June 2006, James Bhd, acquired shares in Bond Bhd, a company incorporated in a foreign country and Bond Bhd had a share capital of FC 12,000,000, and retained profit of FC 8,000,000. James Bhd has adopted Ringgit Malaysia (RM) as its Aliation currency, whereas Bond Bhd has adopted \"FC\" as its Aliation currency. The financial statements of Bond Bhd as at 31 December 2008 were as follows: (a) Profit and loss account for the year ended 31 December 2008 FC'000 Sales Opening stock Purchases Closing stock Cost of sales Gross profit Expenses Profit before tax Tax Profit after tax (b) 36,000 4, 000 22, 000 8, 000 18, 000 18, 000 6, 000 12, 000 4, 000 8, 000 Balance sheet as at 31 December 2008 FC'000 Land Machinery Accumulated depreciation 20, 000 16, 800 (2 ,800) Current Assets Stock Trade debtors Cash 8 ,000 8, 000 2, 000 1 8,000 Current liabilities Trade creditors Tax payable 8, 800 4, 000 12, 800 Net current assets 5, 200 39 ,200 Share capital Revaluation reserves Retained profit 12, 000 6 ,000 17 ,200 35 ,200 4, 000 39, 200 Long term loan 22 Additional information (a) Land was acquired in December 2004 for FC14,000,000. Bond Bhd revalues its land on 31 December 2008. (b) The relevant exchange rates between FC and RM are as follows: 30 June 2006 31 December 2007 31 December 2008 Average for 2008 FC1.00 = RM0.90 FC1.00 = RM0.80 FC1.00 = RM0.70 FC1.00 = RM0.75 REQUIRED: In accordance with FRS 121, show how the Financial Statements of Bond Bhd will be translated? (13 marks) Part (ii) On 1 July 2005, Wira Ltd purchased 100% of the shares of Leena Ltd for RM65,000. At that date, the equity of Leena was as follows: General reserve Retained earnings Share capital RM4,000 2,800 40,000 At 1 July 2005, all the identifiable assets and liabilities of Leena Ltd were at fair value except: Plant and equipment (cost RM80,000) Inventory Land Carrying Amount RM 60,000 3,000 45,000 Fair Value RM 65,000 3,500 55,000 All of the revalued inventory was sold by December 2005. The revalued plant and equipment had a further 5 year useful life. The revalued land was sold during the year ended 30 June 2007 for RM 60,000. Additional information in relation to the year ended 30 June 2007: 1.An interim dividend of RM2,000 was paid by Leena. 2.A final dividend of RM2,400 was declared by Leena. 3.Leena sold inventory to Wira for RM10,000. This inventory had previously cost Leena RM7,500 and was completely sold by Wira to external parties by year end. 4.Wira sold inventory to Leena for RM15,000. This inventory had previously cost Wira RM12,000 and half of this inventory had been sold by Leena to external parties by year end. 23 5.On 31 December 2006, Leena sold Wira office furniture for RM3,000. This furniture originally cost Leena RM3,000 and was written down to RM2,500 when sold. Wira depreciates furniture at the rate of 10% pa. on cost. 6.On 1 February 2007, Leena borrowed RM24,000 from Wira. Interest on the loan is calculated at 7% pa. payable every six months. REQUIRED: a) Show the acquisition analysis as at 1 July 2005. b) Prepare all necessary consolidation journal entries at 30 June 2007. *** END OF EXAMINATION PAPER *** 24 (3 mark) (9 marks)