Question 6

Leo Bhd started business many years ago. Over the years, the company has successfully acquired several smaller companies. The Statements of Profit or Loss of Leo Bhd and its subsidiaries are presented below:

Revenue	Leo RM000 125,000	Tiger RM000 54,000	Cat RM000 46,000
Cost of Sales	(36,000)	(15,000)	(20,000)
Gross profit	89,000	39,000	26,000
Gain on Disposal of Assets	1,200	-	500
Administrative expenses	(25,000)	(18,000)	(15,500)
Distribution costs	(10,000)	(8,000)	(2,000)
Finance costs	(2,700)	(3,000)	(2,000)
Profit before tax	52,500	10,000	7,000
Income tax expense	(13,100)	(2,500)	(1,800)
Profit for the year	39,400	7,500	5,200
Retained Profit as at 1.1.2020	62,700	25,800	5,200

Additional information:

1. On 1 January 2019, Leo Bhd acquired 75% of Tiger Bhds 25 million RM1 ordinary shares for RM35 million when Tiger Bhds retained earnings was RM18 million.

2. On 1 January 2020, Leo Bhd acquired 80% of Cat Bhds 10 million RM1 ordinary shares for RM13 million.

3. Leo Bhd entered into a joint venture business with Lion Bhd where Leo Bhd has 50% share. As at 31 December 2020, the business incurred a loss of RM1.6 million.

4. Leo Bhd disposed 3.75 million of its shares in Tiger Bhd for RM7 million on 31 December 2020. There was no change in the ordinary shares issued by Tiger Bhd since 1 January 2019.

5. Revaluation of Tiger Bhds asset on the acquisition date revealed that a land has increased in value by RM1.7 millon compared to its carrying value. Tiger Bhd has not adjusted its book to account for the increase.

6. Cat Bhd disposed equipment to Tiger Bhd on 1 February 2020 at a gain of RM0.4 million. The equipment was depreciated at 20% per annum using the reducing balance method.

7. During the financial year, Leo Bhd sold inventories to Cat Bhd as follows:

Date of sale	Selling Price (RM000)	Note
20.03.2020	3,000	Cat Bhd has sold the entire goods to a third party.
15.07.2020	4,000	Cat Bhd kept 20% of the inventory purchased.
10.11.2020	2,000	Cat Bhd managed to sell 50% of the inventory.

It is the groups policy to earn profit margins of 10% on intercompany sale of inventories.

8. Tests conducted on 31 December 2020 showed that an impairment of RM300,000 was required for goodwill on acquisition of Tiger Bhd.

9. Leo Bhd valued the non-controlling interest in its subsidiaries using the partial goodwill method.

Required:

Prepared the Consolidated Statement of Profit or Loss and Other Comprehensive Income and the Consolidated Statement of Changes in Equity of Leo Bhd for the year ending 31 December 2020.