QUESTION 2 On 1 July 2017, Venus Bhd acquired 400,000 units ordinary shares, 5,000 6% cumulative preference shares and RM15,000 10% debentures of Mercury Bhd. On that date, the retained earnings of Mercury Bhd was RM100,000. The summarized statements of Profit or Loss and statements of changes in equity (extract) of Venus Bhd and Mercury Bhd for the year ended 30 June 2019 are as follows: Statements of Profit or Loss for the year ended 30 June 2019 Venus Bhd Mercury Bhd RM RM Revenue 1,526,700 876,800 Cost of sales (917,700) (679,400) Gross profit 609,000 197,400 Operating expenses (467,800) (97,200) Finance costs (22,000) (5,000) Investment income 98,000 Profit before taxation 217,200 95,200 Income tax expense (42,500) (30,400) Profit for the year 174,700 64,800 2 Statements of Changes in Equity for the year ended 30 June 2019 (extract) Venus Bhd Mercury Bhd RM RM Retained profit brought forward 760,000 240,000 Profit for the year 174,700 64,800 Interim dividends - Ordinary (30,000) (6,000) Preference (8,000) (3,000) Transfer to general reserve (20,000) (10,000) Retained profit carried forward 876,700 285,800 Additional information: 1. The issued share capital of Venus Bhd and Mercury Bhd were as follows: Company Ordinary 8% Cumulative 6% Cumulative Name shares Preference Preference shares shares Units Units Units Venus Bhd 1,800,000 200,000 Mercury Bhd 500,000 100,000 10% Debentures RM 50,000 2. Land and building of Mercury Bhd have the following value: Fair value as at 1 July 2017 Carrying value as at 30 June 2017 Land RM 470,000 350,000 Building RM 452,000 350,000 Remaining useful lives of the building on the date of acquisition was 20 years. Building is depreciated on straight line method over its useful lives, and to be charged on yearly basis. 3. Investment income of Venus Bhd includes profit from sale of equipment to Mercury Bhd for RM14,000 and dividends received from Mercury Bhd of RM6,300. On the date of disposal, the remaining useful lives of the equipment is 5 years. Depreciation of the equipment is calculated on straight line method over its useful lives, and to be charged on yearly basis. 4. Finance costs of Mercury Bhd are all debenture interest expense. Venus Bhd has not yet recorded the debenture interest receivable from Mercury Bhd. 5. Mercury Bhd sold goods to Venus Bhd at a mark-up of 25% on cost. During the year, Mercury Bhd recorded sales of RM49,500 to Venus Bhd. As at the year-end, Venus Bhd still held one third (1/3) of these goods. 6. The directors of Venus Bhd and Mercury Bhd have declared the final preference dividend on 20 June 2019 but not yet recorded by both companies. 7. Goodwill on consolidation was impaired by RM10,000 as at 30 June 2019. Required: a. Consolidated Statement of Profit or Loss of Venus Bhd and its subsidiary Mercury Bhd for the year ended 30 June 2019. b. Consolidated Statement of Changes in Equity (extract) for the year ended 30 June 2019 showing the group retained profit and non-controlling interest only (20 marks)