Question 4

North Berhad, a public limited company, acquired 80% ordinary shares in East

Berhad on 1 January 2017 when the accumulated retained earnings of East Berhad

were RM640,000. North Berhad also acquired 40% of the issued ordinary share

capital in West Berhad on 1 July 2017 when the accumulated retained earnings of

West Berhad were RM240,000.

Balance sheets of the three companies as at 31 December 2019 are given

below:

North

East

West

Non-current assets

RM000

RM000

RM000

Freehold property

10,000

1,000

-

Plant and equipment

6,100

4,800

1,550

Investments in East

1,600

-

-

Investments in West

700

-

-

18,400

5,800

1,550

Current assets

Inventories 1,660

680

600

Accounts receivable

1,040

580

300

Cash and cash equivalents

480

100

150

3,180

1,360

1,050

Current liabilities

Accounts payable

1,240

2,120

750

Taxation

440

500

60

1,680

2,620

810

Net current assets

1,500

(1,260)

240

19,900

4,540

1,790

Financed by:

Ordinary shares capital

5,000

1,000

1,000

Retained profit b/f

Profit for the year

1,100

8,600

1,440

1,600

500

290

Non-current Liabilities

8% Loan note

10% Bonds

5,200

-

-

500

-

-

19,900

4,540

1,790

Additional information:

(i)

On 30 November 2019 North sold some goods to East for cash of RM320,000.

These goods had originally cost RM220,000 and none had been sold by the

year-end. On the same date North also sold goods to West for cash for

RM220,000. These goods originally cost RM100,000 and West had sold half

by the year end.

6/-6

BAC305/03

(ii)

On 1 January 2017 East owned some items of equipment with a book value of

RM450,000 that had a fair value of RM570,000. These assets were originally

purchased by East on 1 January 2015 and are being depreciated over 6 years.

(iii)

Group policy is to measure non-controlling interests at acquisition at fair value.

The fair value of the non controlling interests in East on 1 January 2017 was

calculated as RM390,000.

(iv)

Cumulative impairment losses on recognised goodwill amounted to

RM150,000 at 31 December 2019. No impairment losses have been

necessary to date relating to the investment in the associate.

Required:

(a)

Prepare a consolidated statement of financial position for North Berhad and

its subsidiary as at 31 December 2019, incorporating its associate in

accordance with MFRS 128;

[10 marks]

(b)

Lay out workings for

(i)

Goodwill;

(ii)

Group retained earnings;

(iii)

Minority interest; and

(iv)

Investment in associates