Prepare the consolidated balance sheet of House Group as at 31 December 2002 with workings of Goodwill, Group retained earnings, Minority interest and Investment in associates.

Given below are the balance sheets of House, Sand and Brick as at 31 December 2003:

	House RM’000		Sand RM’000		Brick RM’000
Non-current assets Property, plant and equipment Investments	16,100 14,000 30,100		8,400 1,820 10,220		8,550 510 9,060
Current assets Inventory Accounts receivable Bank Total assets	1,660 1,040 480 3,180 33,280		680 580 Nil 1,260 11,480		600 300 150 1,050 10,110
Capital and reserve Ordinary shares of RM1 each	10,000		3,600		3,000
Reserves:
Accumulated profits b/f Profit for the year	12,000 8,600 30,600		2,800 1,600 8,000		4,500 1,800 9,300
Non-current liabilities 8% Loan note 10% Bonds	1,000 Nil		Nil 500		Nil Nil
Current liabilities Accounts payable Taxation Overdraft Total equity and liabilities	1,240 440 Nil 1,680 33,280		2,120 500 360 2,980 11,480		750 60 Nil 810 10,110

The following information is relevant:

1. House, a public company acquired 80% of Sand’s ordinary shares paying RM3 per share on 1 January 2001 when the accumulated profits of Sand were RM 2 million. On February 2001 Sand declared and paid a gross ordinary dividend of RM350,000 for the year 2000. House credited its income statement with its share of the dividend received. Dividends were declared gross but paid net of tax of 28%.

2. On 1 January 2002, House acquired 60% of the 10% bonds issued by Sand paying RM300,000.

3. House acquired one third (1/3) of the issued ordinary share capital of Brick on 1 July 2002. House paid RM4 million to acquire the shares. House is able to exert significant influence over Brick.

4. On 1 January 2001, a piece of land of Sand had a fair value of RM240,000 in excess of its book value. The value this land had not changed since acquisition. On 1 January 2001 Sand was successful in applying for a six-year licence to dispose of hazardous waste. The licence was granted by the government at no extra cost. However, House estimated that the licence was worth RM360,000 at the date of acquisition. Sand had undertaken this operation since 1 January 2001.

5. During 2002, House sold goods to Sand for RM260,000. Two thirds of these goods were still in inventory of Sand at 31 December 2002. In November 2002 House sold inventory for RM130,000 to Brick and Brick has not sold any of these inventory.   House transfers inventory to Sand and Brick at a mark up of 30% on cost.

6. As at the end of the year, Sand had not provided for the second half-year interest on the 10% Bonds.

7. Included in accounts payable of Sand was an amount of RM70,000 due to House. However, House has factored without recourse, RM40,000 of these accounts receivable.

8. The group accounting policy for goodwill is to write it off on a straight-line basis over a period of five years with a proportionate charge where it arises part way through an accounting period.

9. Assume that income and expenses accrue evenly throughout the year.

Answer rating: 100% (QA)

To prepare the consolidated balance sheet of House Group as at 31 December 2002 we need to consider the balances of House Sand and Brick along with the workings of Goodwill Group retained earnings Min... View the full answer