Question 2 On 1 January 2020, Cambell acquired 90% of the equity share capital of Soup in a share exchange in which Cambell issued two new shares for every three shares it acquired in Soup. Additionally, on 31 December 2020, Cambell will pay the shareholders of Soup RM1.76 per share acquired. Cambell's cost of capital is 10% per annum. At the date of acquisition, shares in Cambell and Soup had a stock market value of RM8.50 and RM2.50 each, respectively Below are the summarised draft financial statements of both companies. INCOME STATEMENTS FOR THE YEAR ENDING 30 SEPTEMBER 2020 Cambell Soup RM'000 RM'000 Revenue Cost of sales 100,000 76,000 (36,000) (59.800) Gross profit 64,000 16,200 Other investment income 5,000 (2,000) Operating expenses (50,000) (2,400) Finance costs (6,000) nil Profit before tax 13,000 11,800 Income tax expense Profit for the year Equity as at 1 October 2019 Equity shares of RM1 each Retained earnings (2,000) (1.000) 11,000 10.800 100,000 10,000 320,000 50.000 420,000 60.000 The following information is relevant: 0 At the date of acquisition, the fair values of Soup's assets were equal to their carrying amounts with the exception of two items: - An item of plant had a fair value of RM1.8 million above its carrying amount. The remaining life of the plant at the date of acquisition was five years. Depreciation is charged to cost of sales. Soup had a contingent liability which Cambell estimated to have a fair value of RM450,000. This has not changed as at 30 September 2020. Soup has not incorporated these fair value changes into its financial statements. (N) (V) (V) Cambell's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Soup's share price at that date can be deemed to be representative of the fair value of the shares held by the non- controlling interest. Sales from Cambell to Soup throughout the year ended 30 September 2020 had consistently been RM800,000 per month. Cambell made a mark-up on cost of 25% on these sales. Soup had RM1.5 million of these goods in inventory as at 30 September 2020. Cambell's investment income is a dividend received from its investment in a 40% owned associate which it has held for several years. The underlying earnings for the associate for the year ended 30 September 2020 were RM20 million. Although Soup has been profitable since its acquisition by Cambell, the market for Soup's products has been badly hit in recent months and Cambell has calculated that the goodwill has been impaired by RM2 million as at 30 September 2020. Required: (a) Calculate the consolidated goodwill at the date of acquisition of Soup Berhad. [5 marks] (b) Prepare the consolidated income statement for Cambell for the year ended 30 September 2020. [20 marks] Question 3 Hello Bhd bought 80% of the share capital of Kitty Bhd for RM1,240,000 on January 1, 2019. At that date Kitty Berhad's retained earnings stood at RM200.000 The statements of financial position at 31 December 2020, summarised income statements to that date and movement on retained earnings are given below: STATEMENTS OF FINANCIAL POSITION Non-current assets Property, plant and equipment Investment in Kitty Bhd Current assets Hello Bhd RM'000 Kitty Bhd RM'000 3,200 1,800 1,240 4,440 1,800 1,890 1,040 6,330 2.840 Equity Share capital - RM1 ordinary shares 1,000 800 Retained earnings 4,020 1,010 ...4/- | Current liabilities SUMMARISED INCOME STATEMENTS 5,020 1,810 1,310 1,030 6.330 2.840 Profit before interest and tax 780 520 Income tax expense (140' (80) Profit for the year 640 440 Other comprehensive income, net of tax 510 96 Total comprehensive income for the year 1.150 536 MOVEMENT IN RETAINED RESERVES Balance at 31 December 2019 Total comprehensive income for the year Balance at 31 December 2020 2,870 474 1,150 4.020 536 1.010 Hello Bhd sells one half of its holding in Kitty Bhd for RM700,000 on 30 June 2020. At that date, the fair value of the 40% holding in Kitty was slightly more at RM930,000 due to a share price rise. The remaining holding is to be dealt with as an associate. This does not represent a discontinued operation. No entries have been made in the accounts for the above transaction. Assume that profits accrue evenly throughout the year. It is the group's policy to value the non-controlling interest at its proportionate share of the fair value of the subsidiary's identifiable net assets. Required: (a) Prepare the consolidated statement of financial position for the Hello Group for the year ended 31 December 2020; (b) Prepare the statement of comprehensive income for the Hello Group for the year ended 31 December 2020; and Question 4 (a) (b) A Ringgit Malaysia-based company, Kipas Berhad, set up a foreign subsidiary on 30 June 2018. Kipas Berhad subscribed 24 000 for share capital when the exchange rate was 2 = RM1. The subsidiary, Fan Inc. borrowed 72 000 and bought a non-monetary asset for 96 000. Kipas Berhad prepared its financial statements on 31 December 2018 and by that time the exchange rate had moved to 3 = RM1. Required:- Prepare Fan Inc's statement of financial position at 31 December 2018 in both euros and Ringgit Malaysia (RM), and calculate the exchange gain or loss arising since 30 June 2018. [11 marks] Angin Berhad has a foreign subsidiary Wind Limited, acquired on 1 January 2019, which uses the Rupees(R) as its functional currency. Details of Wind Limited are given below: Net assets of Wind Limited at 1 Jan 2019 Net assets of Wind Limited at 1 Jan 2020 Net assets of Wind Limited at 31 Dec 2020 Rupees(R) 340,000 Rupees (R) 410,000 Rupees(R) 500,000 Wind Limited has paid no dividends since acquisition. It translates all income and expense items using the average rate for the period. Relevant exchange rates are: 1 January 2019 1 January 2020 31 December 2020 Average rate 1 Jan 2019 - 31 Dec 2020 Average rate 1 Jan 2020 - 31 Dec 2020 Required:- 2.1 Rupees(R): RM1 2.0 Rupees(R): RM1 1.8 Rupees(R): RM1 1.95 Rupees(R): RM1 1.9 Rupees(R): RM1 Calculate the exchange difference to be included in Angin Berhad's consolidated reserves for the year ended 31 December 2020. Show workings. [14 marks]