QUESTION On 1 July 2019, Galaxy Bhd acquired Pluto Bhd through an acquisition of 80% of the ordinary shares. Pluto had in issue 200,000 ordinary shares of RM1 each. On the same date, Galaxy Bhd acquired two-third of the 6% debentures at par for RM50 million. The purchase consideration for both securities was in cash. At that date, the land of Pluto Bhd was found to be undervalued by RM3 million and a brand was fair valued to RM1.5 million. The intangible asset has an indefinite useful life. Both revaluation were not yet recognized. The non-controlling interest in Pluto Bhd was valued at its proportionate share in the net assets of Pluto Bhd. The financial statements of Galaxy and Pluto: Statement of Profit or Loss for the year ended 30 June 2020 Galaxy Pluto RM'000 136,500 (75,000) 61,500 Revenue Cost of sales Gross profit Loss on disposal of property, plant and equipment Investment income Interest income Administration expenses Other operational expenses Finance cost Profit before tax Taxation Profit/(Loss) for the year RM'000 236,500 (140,000) 96,500 (500) 7,000 2,000 (21,000) (20,500) (3,500) 60,000 (10,000) 50,000 (19,500) (11.500) (3,000) 27,500 (5,000) 22,500 Statement of Changes in Equity for the year ended 30 June 2020 Galaxy Pluto Ordinary Retained Ordinary Retained shares profit shares profit RM 000 RM'000 RM'000 RM'000 Balance as at 1 July 2019 390,000 100,000 215,000 51,000 Profit for the year 50,000 22,500 Interim Ordinary dividend (10,500) (9,500) paid Balance as at 30 June 2020 390,000 139,500 215,000 64,000 Statement of Financial Position as at 30 June 2020 Galaxy Pluto RM'000 RM000 249,000 1,000 Assets Property, plant and equipment Intangibles Investments in Pluto Inventories Trade receivables Bills receivable Cash and bank 304,500 3,500 245,000 25,000 15,000 10,000 20,500 623,500 43,000 32,500 39,000 22,000 386,500 390,000 139,500 Equity and Liabilities Share capital Reserves 6% debentures Bank loan Trade payables Bills payable Accruals 215,000 64,000 75,000 39,000 29,000 23,000 3,000 623,500 20,000 10,500 2,000 386,500 Additional information: 1) Property, plant and equipment Galaxy Bhd Land RM000 Building RM000 Plant RM'000 Equipment RM'000 Total RM'000 51,000 200,000 110,000 15,000 60,000 421,000 15,000 (10,000) 426,000 51,000 (10,000) 50,000 200,000 125,000 Cost/Valuation As at 1 July 2019 Acquisition/Revaluation Disposal As at 30 June 2020 Accum. depreciation As at 1 July 2019 Current year charge Disposal As at 30 June 2020 Carrying value as at 30 June 2020 20,000 4,000 55,000 12,500 30,000 5,000 (5,000) 30,000 105,000 21,500 (5,000) 121,500 24,000 67,500 51,000 176,000 57,500 20,000 304,500 Pluto Bhd Land RM'000 Building RM000 Plant RM'000 Equipment RM000 Total RM000 44,500 150,000 80,000 50,500 4,500 325,000 4,500 44,500 150,000 80.000 55,000 329,500 Cost/Valuation As at 1 July 2019 Acquisition/Revaluation Disposal As at 30 June 2020 Accum. depreciation As at 1 July 2019 Current year charge Disposal As at 30 June 2020 Carrying value as at 30 June 2020 12,000 3,000 32,000 8,000 20,000 5,500 64,000 16,500 15,000 40,000 25,500 80,500 44,500 135,000 40,000 29,500 249,000 The policy of the group is to provide full depreciation in the year of acquisition and none in the year of disposal for all assets, at the following rates: on building at 2% per annum on plant and equipment at 10% per annum. 2) During the year ended 30 June 2020, the following transactions took place: Galaxy Bhd disposed an equipment to Pluto at a loss of RM0.5 million. Pluto Bhd sold goods on credit to Galaxy Bhd for RM5 million, with a profit margin of 20%. On 30 June 2020, 50% of these goods remained in the closing inventories of Galaxy Bhd, and by that date, Galaxy has settled only 60% of the amount due to Pluto Bhd. 3) Details on dividends and interest on debt instruments are: Galaxy Bhd and Pluto Bhd have paid and recorded interim ordinary dividend. Galaxy Bhd has taken credit of its share of Pluto Bhd's dividends. Galaxy Bhd and Pluto Bhd declared final ordinary dividend of RM10 million and RM5 million respectively on 30 June 2020. Both companies have not recorded these proposed dividends. Pluto Bhd paid interest on the 6% debentures for the first 8 months of the year, and Galaxy Bhd received its share. However, no adjustment was made for the remaining 4 months' interest. 4) Details of the inter-company balances: RM8 million of the bills receivable of Galaxy Bhd was due from Pluto Bhd. Pluto Bhd issued a cheque in full settlement to Mars Galaxy Bhd on 29 June 2020. The cheque was received by Mars Galaxy Bhd on 2 July 2020. 5) Goodwill of Pluto Bhd was impaired by RM1.5 million at 30 June 2020. Required: Compute goodwill/bargain purchase on acquisition of Pluto Bhd, using appropriate schedule. a. b. Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020. c. Prepare the Consolidated Statement of Changes in Equity for the year ended 30 June 2020. Compute the group retained profits and non-controlling interest (NCI) as at 30 June 2020. d. Prepare the Consolidated Statement of Financial Position as at 30 June 2020. (SHOW ALL WORKINGS) QUESTION On 1 July 2019, Galaxy Bhd acquired Pluto Bhd through an acquisition of 80% of the ordinary shares. Pluto had in issue 200,000 ordinary shares of RM1 each. On the same date, Galaxy Bhd acquired two-third of the 6% debentures at par for RM50 million. The purchase consideration for both securities was in cash. At that date, the land of Pluto Bhd was found to be undervalued by RM3 million and a brand was fair valued to RM1.5 million. The intangible asset has an indefinite useful life. Both revaluation were not yet recognized. The non-controlling interest in Pluto Bhd was valued at its proportionate share in the net assets of Pluto Bhd. The financial statements of Galaxy and Pluto: Statement of Profit or Loss for the year ended 30 June 2020 Galaxy Pluto RM'000 136,500 (75,000) 61,500 Revenue Cost of sales Gross profit Loss on disposal of property, plant and equipment Investment income Interest income Administration expenses Other operational expenses Finance cost Profit before tax Taxation Profit/(Loss) for the year RM'000 236,500 (140,000) 96,500 (500) 7,000 2,000 (21,000) (20,500) (3,500) 60,000 (10,000) 50,000 (19,500) (11.500) (3,000) 27,500 (5,000) 22,500 Statement of Changes in Equity for the year ended 30 June 2020 Galaxy Pluto Ordinary Retained Ordinary Retained shares profit shares profit RM 000 RM'000 RM'000 RM'000 Balance as at 1 July 2019 390,000 100,000 215,000 51,000 Profit for the year 50,000 22,500 Interim Ordinary dividend (10,500) (9,500) paid Balance as at 30 June 2020 390,000 139,500 215,000 64,000 Statement of Financial Position as at 30 June 2020 Galaxy Pluto RM'000 RM000 249,000 1,000 Assets Property, plant and equipment Intangibles Investments in Pluto Inventories Trade receivables Bills receivable Cash and bank 304,500 3,500 245,000 25,000 15,000 10,000 20,500 623,500 43,000 32,500 39,000 22,000 386,500 390,000 139,500 Equity and Liabilities Share capital Reserves 6% debentures Bank loan Trade payables Bills payable Accruals 215,000 64,000 75,000 39,000 29,000 23,000 3,000 623,500 20,000 10,500 2,000 386,500 Additional information: 1) Property, plant and equipment Galaxy Bhd Land RM000 Building RM000 Plant RM'000 Equipment RM'000 Total RM'000 51,000 200,000 110,000 15,000 60,000 421,000 15,000 (10,000) 426,000 51,000 (10,000) 50,000 200,000 125,000 Cost/Valuation As at 1 July 2019 Acquisition/Revaluation Disposal As at 30 June 2020 Accum. depreciation As at 1 July 2019 Current year charge Disposal As at 30 June 2020 Carrying value as at 30 June 2020 20,000 4,000 55,000 12,500 30,000 5,000 (5,000) 30,000 105,000 21,500 (5,000) 121,500 24,000 67,500 51,000 176,000 57,500 20,000 304,500 Pluto Bhd Land RM'000 Building RM000 Plant RM'000 Equipment RM000 Total RM000 44,500 150,000 80,000 50,500 4,500 325,000 4,500 44,500 150,000 80.000 55,000 329,500 Cost/Valuation As at 1 July 2019 Acquisition/Revaluation Disposal As at 30 June 2020 Accum. depreciation As at 1 July 2019 Current year charge Disposal As at 30 June 2020 Carrying value as at 30 June 2020 12,000 3,000 32,000 8,000 20,000 5,500 64,000 16,500 15,000 40,000 25,500 80,500 44,500 135,000 40,000 29,500 249,000 The policy of the group is to provide full depreciation in the year of acquisition and none in the year of disposal for all assets, at the following rates: on building at 2% per annum on plant and equipment at 10% per annum. 2) During the year ended 30 June 2020, the following transactions took place: Galaxy Bhd disposed an equipment to Pluto at a loss of RM0.5 million. Pluto Bhd sold goods on credit to Galaxy Bhd for RM5 million, with a profit margin of 20%. On 30 June 2020, 50% of these goods remained in the closing inventories of Galaxy Bhd, and by that date, Galaxy has settled only 60% of the amount due to Pluto Bhd. 3) Details on dividends and interest on debt instruments are: Galaxy Bhd and Pluto Bhd have paid and recorded interim ordinary dividend. Galaxy Bhd has taken credit of its share of Pluto Bhd's dividends. Galaxy Bhd and Pluto Bhd declared final ordinary dividend of RM10 million and RM5 million respectively on 30 June 2020. Both companies have not recorded these proposed dividends. Pluto Bhd paid interest on the 6% debentures for the first 8 months of the year, and Galaxy Bhd received its share. However, no adjustment was made for the remaining 4 months' interest. 4) Details of the inter-company balances: RM8 million of the bills receivable of Galaxy Bhd was due from Pluto Bhd. Pluto Bhd issued a cheque in full settlement to Mars Galaxy Bhd on 29 June 2020. The cheque was received by Mars Galaxy Bhd on 2 July 2020. 5) Goodwill of Pluto Bhd was impaired by RM1.5 million at 30 June 2020. Required: Compute goodwill/bargain purchase on acquisition of Pluto Bhd, using appropriate schedule. a. b. Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020. c. Prepare the Consolidated Statement of Changes in Equity for the year ended 30 June 2020. Compute the group retained profits and non-controlling interest (NCI) as at 30 June 2020. d. Prepare the Consolidated Statement of Financial Position as at 30 June 2020. (SHOW ALL WORKINGS)