Exo Bhd (a public limited company) financial year end every 30 June, is in the process of downsizing its business operations. The Chief Executive Officer (CEO) of Exo Bhd plans to streamline its operations and suggests disposal of 90% of its holding in Blackpink Bhd on 1 July 2018 for RM160 million. Exo Bhd holds 32 million units out of 40 million units of issued ordinary shares of RM1 each in Blackpink Bhd which were acquired in 2014 at a cost of RM100 million. The balances of Blackpink Bhd’s retained profit and general reserve on the date of acquisition were RM42 million and RM12 million respectively. The carrying values of Blackpink’s net assets reflect their fair values except for a piece of land which has a fair value of RM20 million above the carrying value at the acquisition date. Goodwill on acquisition was remain unimpaired.

The balance in the retained profit of Blackpink Bhd on 1 July 2018 was RM80 million and its forecast profit for year ending 30 June 2019 is RM20 million. The market price of Blackpink Bhd’s ordinary shares on the date of disposal was RM2.00 per share. Balances on other accounts are expected to remain unchanged. Profits are deemed to accrue evenly throughout the year.

REQUIRED:
a) Discuss the effects of the implementation of the plan to the group’s financial statements as at 30 June 2019.

Exo Bhd in the process of disposal (shares) in Blackpink Bhd resulting in gain/losses. Explain whether this action will effect the financial statements as at 30 June 2019 or not. Show calculation or journal entry if any.

Answer rating: 100% (QA)

Effet n imlementtin f ln n gru finnil sttement Dissl f 90 hlding in Blkink Bhd will result ... View the full answer