QUESTION (50 MARKS: 120 MINUTES) The financial statements of WAN Berhad (WAN) and its subsidiaries for the year ended 31 December 2019 are presented below: Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2019 WAN ABI UMI RM000 RM'000 RM'000 Revenue 99,000 72,000 65,400 - Cost of sales (57,000) (48,000) (42,000) Gross profit 42,000 24,000 23,400 Other income 11,200 - Operating expenses (21,000) (14,520) (12,600) Profit before taxation 32,200 9,480 10,800 Less: Taxation (7,728) (2,275) (2,592) Profit after taxation 24,472 7,205 8,208 ABI Movement of Retained Profit For the year ended 31 December 2019 WAN UMI RM'000 RM'000 RM'000 Retained profit b/f 132,800 50,400 25,000 Profit for the period 24,472 7,205 8,208 Dividend paid (22,800) (6,000) Retained profit c/f 134,472 51,605 33,208 UMI RM'000 Investment in ABI Berhad Investment in UMI Berhad Investment in Tunas Berhad Other assets Statement of Financial Position As at 31 December 2019 WAN ABI RM'000 RM'000 95,000 15,600 40,000 17,000 522,772 172,805 650,372 212,805 400,000 100,000 134,472 51,605 115,900 61,200 650,372 212,805 120,208 120,208 Share Capital Retained profit Other liabilities 60,000 33,208 27,000 120,208 Additional information: 1. 2. 3 4. 5. 6. WAN acquired 60% ownership interest in ABI Berhad (ABI) on 1 June 2012 for a consideration of RM95 million when the retained profit of ABI was RM36 million. Later, on 1 January 2015, WAN acquired 30% ownership interest in UMI Berhad (UMI) for a consideration of RM23.4 million when the retained profit of UMI was RM12 million. WAN exerts significant influence in UMI. The market price for these shares on the acquisition dates was RM1.50 and RM1.30 respectively. WAN accounted investment in ABI and UMI using a cost method. On 1 January 2017, ABI acquired 40% of interest in UMI for a consideration of RM40 million. The retained earnings of UMI on this date was RM20 million. The market price of UML's shares on those date was RM1.50. WAN had acquired 30% interest in the equity capital of Tunas Berhad (Tunas) on 1 January 2019 for a consideration of RM17 million WAN treated this investment as investment in associate and accounted using a cost method. WAN sold 6 million shares in UMI on 1 September 2019 for a consideration of RM11.4 million. The market price of UMI's shares on those date was RM1.90. Gain or loss from disposal of shares was accounted in other income. ABI sold an equipment to UMI for RM4 million on 1 January 2018. This equipment had a carrying value of RM2.5 million prior to transfer. The equipment had a five- year useful economic life remaining at the date of transfer. During the year, UMI sold goods worth of RM1.5 million to WAN each month. UMI earned a 20% mark-up on cost on the goods sold to WAN. On 31 December 2019, WAN had sold all of these goods except RM1.2 million of the most recent delivery. These goods remained in the inventory of WAN at 31 December 2019. At 31 December 2019, goodwill was assessed for impairment, and the calculation showed that an impairment loss of RM2 million would be recognised in the case of ABI, and no impairment loss in the case of UMI. Goodwill impairments should be included within operating expenses. During the year, WAN sold goods to Tunas amounting to RM10,000,000 and RM5,000,000 still remained in the ending inventories of Tunas with a profit of 40% on selling price at the year end. All dividends were paid during the current year. Dividend income was included within other income. Tunas profit for the year 2019 was RM2,800,000. There were no changes in the share capital for all the companies in the group. Number of outstanding shares as at 31 December 2019 as follow: WAN ABI UMI Share Capital (*000 units) 400,000 100,000 60,000 The group policy is to measure the non-controlling interest at fair value. Assume all revenues and expenses were accrued evenly throughout the year. The corporate tax rate is at 24%. The tax effects on unrealized profit or loss on intragroup transactions should be ignored. 7. 8. 9. 10. 11. 12. 13. 14. REQUIRED: Calculate goodwill on consolidation in ABI and UMI. Allocate the goodwill to parent and non-controlling interest. (5 Marks) (b) Prepare the relevant consolidation journal entries of WAN Berhad and its subsidiaries for the year ended 31 December 2019 using one-stage method. (23 Marks) (c) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income of WAN Berhad and its subsidiaries for the year ended 31 December 2019. (7 Marks) (d) (e) Prepare the Consolidated Statement of Financial Position of WAN Berhad and its subsidiaries as at 31 December 2019. (10 Marks) Explain the impact on the consolidated financial statements if the non-controlling interest in ABI and UMI are measured using the proportionate share of net identifiable assets. (5 Marks) QUESTION (50 MARKS: 120 MINUTES) The financial statements of WAN Berhad (WAN) and its subsidiaries for the year ended 31 December 2019 are presented below: Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2019 WAN ABI UMI RM000 RM'000 RM'000 Revenue 99,000 72,000 65,400 - Cost of sales (57,000) (48,000) (42,000) Gross profit 42,000 24,000 23,400 Other income 11,200 - Operating expenses (21,000) (14,520) (12,600) Profit before taxation 32,200 9,480 10,800 Less: Taxation (7,728) (2,275) (2,592) Profit after taxation 24,472 7,205 8,208 ABI Movement of Retained Profit For the year ended 31 December 2019 WAN UMI RM'000 RM'000 RM'000 Retained profit b/f 132,800 50,400 25,000 Profit for the period 24,472 7,205 8,208 Dividend paid (22,800) (6,000) Retained profit c/f 134,472 51,605 33,208 UMI RM'000 Investment in ABI Berhad Investment in UMI Berhad Investment in Tunas Berhad Other assets Statement of Financial Position As at 31 December 2019 WAN ABI RM'000 RM'000 95,000 15,600 40,000 17,000 522,772 172,805 650,372 212,805 400,000 100,000 134,472 51,605 115,900 61,200 650,372 212,805 120,208 120,208 Share Capital Retained profit Other liabilities 60,000 33,208 27,000 120,208 Additional information: 1. 2. 3 4. 5. 6. WAN acquired 60% ownership interest in ABI Berhad (ABI) on 1 June 2012 for a consideration of RM95 million when the retained profit of ABI was RM36 million. Later, on 1 January 2015, WAN acquired 30% ownership interest in UMI Berhad (UMI) for a consideration of RM23.4 million when the retained profit of UMI was RM12 million. WAN exerts significant influence in UMI. The market price for these shares on the acquisition dates was RM1.50 and RM1.30 respectively. WAN accounted investment in ABI and UMI using a cost method. On 1 January 2017, ABI acquired 40% of interest in UMI for a consideration of RM40 million. The retained earnings of UMI on this date was RM20 million. The market price of UML's shares on those date was RM1.50. WAN had acquired 30% interest in the equity capital of Tunas Berhad (Tunas) on 1 January 2019 for a consideration of RM17 million WAN treated this investment as investment in associate and accounted using a cost method. WAN sold 6 million shares in UMI on 1 September 2019 for a consideration of RM11.4 million. The market price of UMI's shares on those date was RM1.90. Gain or loss from disposal of shares was accounted in other income. ABI sold an equipment to UMI for RM4 million on 1 January 2018. This equipment had a carrying value of RM2.5 million prior to transfer. The equipment had a five- year useful economic life remaining at the date of transfer. During the year, UMI sold goods worth of RM1.5 million to WAN each month. UMI earned a 20% mark-up on cost on the goods sold to WAN. On 31 December 2019, WAN had sold all of these goods except RM1.2 million of the most recent delivery. These goods remained in the inventory of WAN at 31 December 2019. At 31 December 2019, goodwill was assessed for impairment, and the calculation showed that an impairment loss of RM2 million would be recognised in the case of ABI, and no impairment loss in the case of UMI. Goodwill impairments should be included within operating expenses. During the year, WAN sold goods to Tunas amounting to RM10,000,000 and RM5,000,000 still remained in the ending inventories of Tunas with a profit of 40% on selling price at the year end. All dividends were paid during the current year. Dividend income was included within other income. Tunas profit for the year 2019 was RM2,800,000. There were no changes in the share capital for all the companies in the group. Number of outstanding shares as at 31 December 2019 as follow: WAN ABI UMI Share Capital (*000 units) 400,000 100,000 60,000 The group policy is to measure the non-controlling interest at fair value. Assume all revenues and expenses were accrued evenly throughout the year. The corporate tax rate is at 24%. The tax effects on unrealized profit or loss on intragroup transactions should be ignored. 7. 8. 9. 10. 11. 12. 13. 14. REQUIRED: Calculate goodwill on consolidation in ABI and UMI. Allocate the goodwill to parent and non-controlling interest. (5 Marks) (b) Prepare the relevant consolidation journal entries of WAN Berhad and its subsidiaries for the year ended 31 December 2019 using one-stage method. (23 Marks) (c) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income of WAN Berhad and its subsidiaries for the year ended 31 December 2019. (7 Marks) (d) (e) Prepare the Consolidated Statement of Financial Position of WAN Berhad and its subsidiaries as at 31 December 2019. (10 Marks) Explain the impact on the consolidated financial statements if the non-controlling interest in ABI and UMI are measured using the proportionate share of net identifiable assets