QUESTION 4 (40 MARKS)

1. Control is not only evidenced by share ownership of more than 50 percent. Based on MFRS 10 Consolidated Financial Statement and using appropriate example, discuss any other two evidence of control.

(8 marks)

2. On 31 December 2020, MULTI BHD. acquired 70 percent interest in the equity capital of CABLE BHD. The following are the Statements of Profit or Loss for the year ended 31 December 2021 for both companies.

	MULTI BHD. (RM)	CABLE BHD. (RM)
Revenue	1,300,000	600,000
Cost of sales	(700,000)	(350,000)
Gross profit	600,000	250,000
Other income: Gain on fair value of investment property Gain on sale of equipment Loss on sale of property Dividend	10,000 7,000	20,000 (30,000)
Selling and distribution expenses	(210,000)	(70,000)
Administrative and other operating expenses	(285,000)	(114,000)
Profit from operations	122,000	56,000
Finance costs	(10,000)	(6,000)
Profit before tax	112,000	50,000
Income tax	(22,000)	(10,000)
Profit after tax	90,000	40,000

The followings are the Statements of Financial Position as at 31 December 2021 for both companies.

	MULTI BHD. (RM)	CABLE BHD. (RM)
Non-current asset
Property, plant and equipment	415,000	492,500
Investment property	-	120,000
Investment in CABLE	500,000	-
Current assets
Inventory	60,000	50,000
Trade and other receivables	100,000	70,000
Cash and cash equivalents	115,000	47,500
TOTAL ASSETS	1,190,000	780,000
Equity
Ordinary shares: 450,000 units 200,000 units	900,000	400,000
Retained earnings	175,000	170,000
Revaluation reserve	15,000	0
Non- current liabilities
Loan from bank	58,000	106,000
Current liabilities
Trade payables	30,000	80,000
Loan from bank	12,000	24,000
TOTAL EQUITIES AND LIABILITIES	1,190,000	780.000

Additional information:

1. CABLE retained profits was RM140,000 and the net aggregate fair value of assets and liabilities was RM600,000 at the time of acquisition.
2. On acquisition date, the property of CABLE in which was purchased on 1 January 2020 at RM600,000 has a fair value of RM640,000 as compared to its carrying amount of RM580,000. All other assets and liabilities owned by CABLE have the same fair value and book value at the acquisition date.
3. In calculating the goodwill, the non-controlling interest is measured at fair value at acquisition date.
4. During the financial year, CABLE sold RM30,000 inventories to MULTI at a selling price of RM60,000. It was determined that 10 percent of these inventories remained unsold at the end of the period.
5. On 1 July 2021, MULTI sold one of its equipment to CABLE at a gain of RM10,000. The equipment was acquired by MULTI on 1 July 2019 at RM50,000.
6. Dividend income of MULTI is an interim dividend from CABLE paid on 10 July 2021.
7. Trade receivables of MULTI include RM30,000 due from CABLE.
8. Property is depreciated using straight line method for 30 years without residual value.
9. Equipment is depreciated at 10% per annum on cost without residual value.

Required:

1. Calculate the amount of goodwill on the acquisition date.

(4 marks)

2. Prepare the Group Statement of Profit or Loss for the year ended 31 December 2021. Show the detail calculation of each item.

(13 marks)

3. Prepare the Group Statement of Financial Position as at 31 December 2021. Show the detail calculation of each item.

(15 marks)