QUESTION 3:

Garam Bhd acquires a 6 million (60% interest) in the issued 10 million shares of Gula Bhd on 31 December 2019. The contributed share capital of Gula Bhd on this date is RM12 million. The purchase consideration is RM10 million of which RM2 million was in cash and the balance, by an issue of 4 million Garam Bhd ordinary shares valued at RM2 each. At the acquisition date, the retained profits of Gula Bhd were RM2 million each. On the acquisition date, the total fair value of the ordinary shares of Gula Bhd is RM16,666,667.

Apart from recording the cash paid, Garam Bhd has not recorded the issuance of shares to reflect the acquisition.

The draft statements of financial position of the two companies for the year ended 31 December 2019 are as follows:

		Garam Bhd RM000		Gula Bhd RM000
Property, Plant and Equipment:
Freehold land, at cost		8,000		4,000
Other fixed assets, at NBV		30,000		16,000,
		38,000		20,000
Investment in Amanah Bhd:
(cash paid)		2,000		-
Current assets		16,000		15,000
		56,000		35,000
Contributed Share capital of RM1/share		24,000		12,000
Revaluation reserves		5,000		-
Retained profits		10,000		8,000
		39,000		20,000
Long term loans		7,000		5,000
Current liabilities		10,000		10,000
		56,000		35,000

At the acquisition date, the freehold land of Gula Bhd has a fair value of RM6 million. No adjustment has been made for this value. On 31 December 2019, Gula Bhd, on the advice of a professional valuer, placed a valuation of RM10 million on the freehold land. This new valuation has not been incorporated in the draft statement of financial position. The directors wish to incorporate this new valuation in the final accounts.

The movements in the retained profits of the two companies for the year ended 31 December 2019 are as follows:

		Garam Bhd RM000		Gula Bhd RM000
Retained profit for the year		3,000		2,000
Retained profits brought forward		7,000		6,000
Retained profits carried forward		10,000		8,000

Garam Bhds accounting policy is to measure non-controlling interest at its acquisition date fair value.

You are required to prepare the consolidated statement of financial position of Garam Bhd as at 31 December 2019.

(Total: 20 Marks)