QUESTION 2 (40 MARKS) The following is the latest financial statement of Pike Berhad, Metal Berhad and Hund Berhad. Statement of Profit or Loss and Other Comprehensive Income for financial year ended 31 October 2020 (RM'000) Pike Metal Hund Revenues 10,000 6,000 3,000 Less: Cost of goods sold (2,000) (1,200) (600) Gross profits 8,000 4,800 2,400 Operating expenses (1,400) (860) (252) Other administration expense (500) (150) (108) Other income 350 80 36 Profit before taxation 6,450 3,870 2,076 Less: Taxation (1,400) (800) (648) Profit after taxation 5,050 3,070 1,428 Other comprehensive income Revaluation reserve 360 90 60 Fair value reserve 150 (10) 24 Total other comprehensive income 510 80 84 Total comprehensive income 5,560 3,150 1,512 Metal Hund 52,732 20,673 Statement of Financial Position as at 31 October 2020 (RM'000) Pike Assets Non-current Property, plant and Equipment 92,523 Investment in Metal 38,700 Investment in Hund Investment in Financial Asset Through Reserves 4,150 Other assets 850 136,223 Current Inventories 6,250 Trade receivables 1,200 Other assets 100 10,347 Total assets 154,120 23,600 2,050 1,484 670 543 79,052 22,700 4,390 2,659 600 400 50 10 864 563 86,956 26,332 Bank 1 Liabilities Non-current Bank loan Other payables 1,180 100 1,280 456 90 546 120 40 160 60 250 60 1,590 80 40 666 30 250 Current Trade payables Other payables Total liabilities Equities Contributed ordinary share capital Contributed ordinary preference capital Revaluation reserve Fair value reserve Retained profits Total equities Total equities and liabilities 30,000 15,000 2,360 1,650 103,520 152,530 154,120 25,000 4,000 1,390 850 55,050 86,290 86,956 10,000 1,000 1,020 634 13,428 26,082 26,332 Item Number of ordinary shares in issue (units) ('000) Number of preference shares in issue (units) ('000) Pike 20,000 5,000 Metal 10,000 2,000 Hund 5,000 500 Additional Information: 1. On 1 November 2016, Pike purchased 45% of Metal Berhad's ordinary shares, in cash, at RM8.60 per share when the share price of Metal was RM8.40. On this date, the remaining shareholders of Metal have agreed to the decision to appoint Pike as the controlling shareholders of Metal given Pike Berhad position as the largest shareholders in Metal. In addition, the net assets of Metal Berhad on 1 November 2016 were as follows: RM'000 Contributed ordinary share capital 25,000 Contributed ordinary preference capital 4,000 Revaluation reserve 360 Fair value reserve 125 Retained profits 45,600 On 1 November 2016, the following transactions have not been recorded: (a) Pike will pay additional RM0.85 million cash in three years' time from 1 November 2016 if there is an increase in the retained profits of Metal Berhad in the next three years. The retained profits of Metal as at 31 October 2017 and 31 October 2018 were RM47.2 million and RM49.5 million, respectively. (b) On the same date Pike has purchased 15% of Metal Berhad preference shares at RM3 each. 2 (c) Metal has a contingent liability for an estimated value of RM0.45 million. On 1 October 2017 the court has ordered Metal to pay RM0.62 million to settle the claim. On 1 November 2016, Metal Berhad has a building with a fair value of RM150,000 below the book value. The building has 20 years remaining life. 2. On 1 February 2020, Metal Berhad purchased 80% of Hund Berhad's ordinary shares at RM5.90 each when Hund's share price was RM5.70. Also, on this date, Hund has a brand called 'Woops' with estimated fair value of RM5 million and 10 years remaining life. 3. During the current financial year, Metal has purchased RM3.8 million goods from Pike at 35% profit margin on selling price. At year end, 5% of these goods remain in Metal's book. Also Pike has purchased RM8.4 million goods from Metal at 20% profit margin. At year end Pike has sold RM7.28 million of these goods. 4. On 1 April 2020, Hund sold RM2.5 million goods to Metal at 25% profit margin. At year end, 65% of these goods have been sold by Metal. 5. On 1 November 2019, Pike has signed a contract with two other companies to undertake a project on road construction for a completion period of three years beginning 1 December 2019. The contract stipulated an agreement that all parties in the contract has joint control over the project. Also the contract specified the share of the project's assets, liabilities, revenues and expenses that each party in the contract is entitled to. For this project, on 1 December 2019, Pike contributed RM6 million equipment (with 6 years remaining life), RM3 million inventories and RM6 million cash. Pike has 30%, 20%, 30% and 20% share of the project's respective assets, liabilities, revenues and expenses. As at 31 October 2020, the road's project reported RM20 million property, plant and equipment, RM20 million cash, RM10 million inventories, RM2 million trade payables, RM6 million revenues and RM1.6 million operating expenses. 6. The group policy is to measure non-controlling interest at fair value of market. 7. The cost of capital of Pike, Metal and Hund is 6% per annum. 8. Ignore deferred taxation effects. Required: Prepare Consolidated Statement of Profit or Loss for financial year ended 31 October 2020. Show your workings (14 Marks) Prepare Consolidated Statement of Financial Position as at 31 October 2020. Show your workings (21 Marks) Comment the performance of Pike's investment in Metal, Hund and the road construction project (5 Marks) QUESTION 2 (40 MARKS) The following is the latest financial statement of Pike Berhad, Metal Berhad and Hund Berhad. Statement of Profit or Loss and Other Comprehensive Income for financial year ended 31 October 2020 (RM'000) Pike Metal Hund Revenues 10,000 6,000 3,000 Less: Cost of goods sold (2,000) (1,200) (600) Gross profits 8,000 4,800 2,400 Operating expenses (1,400) (860) (252) Other administration expense (500) (150) (108) Other income 350 80 36 Profit before taxation 6,450 3,870 2,076 Less: Taxation (1,400) (800) (648) Profit after taxation 5,050 3,070 1,428 Other comprehensive income Revaluation reserve 360 90 60 Fair value reserve 150 (10) 24 Total other comprehensive income 510 80 84 Total comprehensive income 5,560 3,150 1,512 Metal Hund 52,732 20,673 Statement of Financial Position as at 31 October 2020 (RM'000) Pike Assets Non-current Property, plant and Equipment 92,523 Investment in Metal 38,700 Investment in Hund Investment in Financial Asset Through Reserves 4,150 Other assets 850 136,223 Current Inventories 6,250 Trade receivables 1,200 Other assets 100 10,347 Total assets 154,120 23,600 2,050 1,484 670 543 79,052 22,700 4,390 2,659 600 400 50 10 864 563 86,956 26,332 Bank 1 Liabilities Non-current Bank loan Other payables 1,180 100 1,280 456 90 546 120 40 160 60 250 60 1,590 80 40 666 30 250 Current Trade payables Other payables Total liabilities Equities Contributed ordinary share capital Contributed ordinary preference capital Revaluation reserve Fair value reserve Retained profits Total equities Total equities and liabilities 30,000 15,000 2,360 1,650 103,520 152,530 154,120 25,000 4,000 1,390 850 55,050 86,290 86,956 10,000 1,000 1,020 634 13,428 26,082 26,332 Item Number of ordinary shares in issue (units) ('000) Number of preference shares in issue (units) ('000) Pike 20,000 5,000 Metal 10,000 2,000 Hund 5,000 500 Additional Information: 1. On 1 November 2016, Pike purchased 45% of Metal Berhad's ordinary shares, in cash, at RM8.60 per share when the share price of Metal was RM8.40. On this date, the remaining shareholders of Metal have agreed to the decision to appoint Pike as the controlling shareholders of Metal given Pike Berhad position as the largest shareholders in Metal. In addition, the net assets of Metal Berhad on 1 November 2016 were as follows: RM'000 Contributed ordinary share capital 25,000 Contributed ordinary preference capital 4,000 Revaluation reserve 360 Fair value reserve 125 Retained profits 45,600 On 1 November 2016, the following transactions have not been recorded: (a) Pike will pay additional RM0.85 million cash in three years' time from 1 November 2016 if there is an increase in the retained profits of Metal Berhad in the next three years. The retained profits of Metal as at 31 October 2017 and 31 October 2018 were RM47.2 million and RM49.5 million, respectively. (b) On the same date Pike has purchased 15% of Metal Berhad preference shares at RM3 each. 2 (c) Metal has a contingent liability for an estimated value of RM0.45 million. On 1 October 2017 the court has ordered Metal to pay RM0.62 million to settle the claim. On 1 November 2016, Metal Berhad has a building with a fair value of RM150,000 below the book value. The building has 20 years remaining life. 2. On 1 February 2020, Metal Berhad purchased 80% of Hund Berhad's ordinary shares at RM5.90 each when Hund's share price was RM5.70. Also, on this date, Hund has a brand called 'Woops' with estimated fair value of RM5 million and 10 years remaining life. 3. During the current financial year, Metal has purchased RM3.8 million goods from Pike at 35% profit margin on selling price. At year end, 5% of these goods remain in Metal's book. Also Pike has purchased RM8.4 million goods from Metal at 20% profit margin. At year end Pike has sold RM7.28 million of these goods. 4. On 1 April 2020, Hund sold RM2.5 million goods to Metal at 25% profit margin. At year end, 65% of these goods have been sold by Metal. 5. On 1 November 2019, Pike has signed a contract with two other companies to undertake a project on road construction for a completion period of three years beginning 1 December 2019. The contract stipulated an agreement that all parties in the contract has joint control over the project. Also the contract specified the share of the project's assets, liabilities, revenues and expenses that each party in the contract is entitled to. For this project, on 1 December 2019, Pike contributed RM6 million equipment (with 6 years remaining life), RM3 million inventories and RM6 million cash. Pike has 30%, 20%, 30% and 20% share of the project's respective assets, liabilities, revenues and expenses. As at 31 October 2020, the road's project reported RM20 million property, plant and equipment, RM20 million cash, RM10 million inventories, RM2 million trade payables, RM6 million revenues and RM1.6 million operating expenses. 6. The group policy is to measure non-controlling interest at fair value of market. 7. The cost of capital of Pike, Metal and Hund is 6% per annum. 8. Ignore deferred taxation effects. Required: Prepare Consolidated Statement of Profit or Loss for financial year ended 31 October 2020. Show your workings (14 Marks) Prepare Consolidated Statement of Financial Position as at 31 October 2020. Show your workings (21 Marks) Comment the performance of Pike's investment in Metal, Hund and the road construction project