PRE TEST 1 Solution 3 TUTORIAL QUESTIONS PDF

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ADVANCED FINANCIAL ACCOUNTING AND REPORTING 1 (FAR610)PRE-TEST QUESTIONSQUESTION 3Biscotti Bhd is executing its strategic business investment by investing in CannoliBhd, Gelato Bhd and Granita Bhd. Given below are the statements of financialposition as at 30 June 2019 of Biscotti Bhd, Cannoli Bhd, G...

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ADVANCED FINANCIAL ACCOUNTING AND REPORTING 1 (FAR610) PRE-TEST QUESTIONS QUESTION 3 Biscotti Bhd is executing its strategic business investment by investing in Cannoli Bhd, Gelato Bhd and Granita Bhd. Given below are the statements of financial position as at 30 June 2019 of Biscotti Bhd, Cannoli Bhd, Gelato Bhd and Granita Bhd. Statement of Financial Position as at 30 June 2019

Assets Non-current assets (carrying value) Investment in Cannoli Bhd Investment in Gelato Bhd Investment in Granita Bhd Inventories Trade Receivables Bill Receivables Bank Total Assets Equities Ordinary share capital Retained profit as at 1 July 2018 Retained profit for the year Other reserve as at 1 July 2018 Other reserve transfer for the year Liabilities Trade Payables Ordinary dividend payables Bill Payables Total Equities and Liabilities

Biscotti Bhd

Cannoli Bhd

Gelato Bhd

Granita Bhd

RM Million

RM Million

RM Million

RM Millon

71.0 70.0 4.8 6.0 13.6 24.7 18.2 28.08 236.38

50.0 9.6 15.2 16.8 7.2 2.8 101.6

20.0 4.0 2.2 4.0 30.2

10.0 8.5 2.2 2.8 23.5

112.8 53.2 12.6 15.0 5.0

40.0 24.2 7.5 8.0 2.0

20.0 4.8 -

16.0 2.0 1.2 -

19.48 6.0 12.3 236.38

11.9 2.0 6.0 101.6

2.4 0.9 2.1 30.2

4.3 23.5

Additional information: 1. Biscotti Bhd acquired 80% of 40 million issued ordinary shares of Cannoli Bhd on 1 July 2018. The acquisition of the ordinary shares was settled by cash payment of RM6 million and issuance of 20 million shares in Biscotti Bhd. The share’s market prices of Biscotti Bhd and Cannoli Bhd on 1 July 2018 were RM3.20 and RM2.00 respectively.

2. At the acquisition date, Cannoli Bhd’s land was revalued at RM5 million more than the carrying value. 3. On 1 August 2018, Biscotti Bhd and Cannoli Bhd acquired 20% and 40% of Gelato Bhd’s ordinary shares respectively. The issued ordinary shares of Gelato Bhd on that date was 20 million units. Gelato Bhd was incorpoated on 1 July 2018. The market price of Gelato Bhd’s ordinary share on 1 August 2018 was RM1.50 each. 4. Biscotti Bhd acquired 30% of 16 million units of ordinary shares of Granita Bhd on 1 January 2019 for RM6 million. Since the acquisition date, Biscotti Bhd applies equity accounting to account for its investment in Granita Bhd. 5. On 1 October 2018, Biscotti Bhd sold one of its plant to Gelato Bhd at RM0.2 million more than its carrying value. It is the group policy to depreciate plants at 10% on net book value on yearly basis. 6. On 1 January 2019, Gelato Bhd sold goods, on credit, to Cannoli Bhd invoiced at RM1 million at 20% on selling price. Half (1/2) of these goods were still remained in Cannoli Bhd’s inventory on 30 June 2019. Cannoli Bhd paid Gelato Bhd 30% of RM1 million to clear the outstanding balance on 29 June 2019. Gelato Bhd received and recorded this amount on 3 Juy 2019. 7. 50% of bills payable in Cannoli Bhd were in favor of Biscotti Bhd, of which 60% has been discounted to non-related parties. 8. Biscotti Bhd, Cannoli Bhd and Gelato Bhd have declared, approved and record ordinary dividend in June 2019. However, Biscotti Bhd and Cannoli Bhd has not recorded the dividend income from their respective investment. 9. Goodwill on the acquisition of Cannoli Bhd had been impaired and should be written down by 20% for the year ended 30 June 2019. 10. The group policy to measure the non-controlling interest at the fair value at the acquisition date. 11. All profits are deemed to accrue evenly throughout the year. Required: a. Compute goodwill/bargain purchase on the acquisition of Cannoli Bhd. (5 Marks) b. Compute goodwill/bargain purchase on the acquisition of Gelato Bhd. (4 Marks) c. Prepare the consolidated statement of financial position of Biscotti Bhd group as at 30 June 2019. (26 marks) (TOTAL: 35 Marks) Note: You should show all workings to the nearest RM’000.

SOLUTION FAR610 TEST 1 JUNE 2020 Holding W1

NCI

Biscotti Cannoli

direct in direct in

Cannoli Gelato

0.80 0.40

Biscotti

direct in

Gelato

0.20

Biscotti

indirect in

Gelato

0.32

Biscotti

total interest in

Gelato

0.52

DOA 0.20

1/7/18 1/8/18

0.48

1/8/18

a. Compute goodwill/bargain purchase on the acquisition of Cannoli Bhd.

CT - Cash CT - Shares (20 X 3.20) NCI (40 X 0.2 X 2)

0.20

RM’000 6,000 √ 64,000 √√ 16,000 √√√ 86,000

FV of NA of Sub Share capital RE DOA General reserve ARR Land

40,000 √ 24,200 √ 8,000 √ 5,000 √

Impairment Goodwill

(77,200) 8,800 (1,760) 7,040

(10√ x ½ = 5 Marks)

b. Compute goodwill/bargain purchase on the acquisition of Gelato Bhd. RM’000 CT - Cash CT - Indirect NCI - Indirect NCI (0.48 X 20 X 1.50)

4,800 0.20 0.48

√

9,600 √ (1,920) √ 14,400 √√√ 26,880

FV of NA of Sub Share capital RE DOA (4.8 /12) Goodwill

20,000 √ 400 √

(20,400) 6,480

(8√ x ½ = 4 Marks)

c. Prepare the consolidated statement of financial position of Biscotti Bhd group as at 30 June 2019. W 1

Analysis of financial statements - c/d GRE NCI's value @ DOA NCI's value @ DOA Investment NCI in

16,000√

Gelato

14,400√ (1,920) √

Gelato Cannoli 31,700 √ (24,200) √

Re cd RE DOA

360 √√ 7,860

OS Div - Gelato

General reserve

10,000 √

GR DOA

(8,000) √ 2,000

Retained earnings

4,800 √

RE DOA URP Inventory

(400) √ (100) √ 4,300

OS Div - Gelato Impairment GW URP Plant OPOD Plant

1,572

1,600

400

Gelato

RE c/d

OS Div - Cannoli

(0.9 X 0.4) 6,288

Cannoli

GR c/d

RE Share of profit Asso

NCI

Cannoli

Retained earnings

Retained earnings

GGR

2,236

2,064

Biscotti 65,800 √ 180 √√√ 1,600 √√ 180 √√ (1,760) √ (200) √ 20 √

(1.2 X 0.5 X 0.3) (2 X 0.8) (0.9 X 0.2)

65,820

General Reserve

20,000√ 74,344

21,600

32,516 24√

CV investment in Asso = Share of profit (1.2 X 0.5 X 0.3 = 180) + Cost of investment (6,000) = 6,180

CSOFP as at 30 JUNE 2019 GROUP RM ‘000 Assets Non-current assets (CV)

(71+50+20)+5-0.2+0.02

√√√√

145,820

Investment in Cannoli Bhd

-

Investment in Gelato Bhd Investment in Granita Bhd

(6+0.180)

6,180

Goodwill on consolidation

Qa + Qb

√√

13,520

√

Inventories

(13.6+15.2+4)-0.1

32,700

√√

Trade Receivables Bill Receivables

(24.7+16.8+2.2)-0.3-0.7 (18.2+7.2)-1.2 (1.6-1.6)+(0.36-0.36)+(0.180.18) (28.08+2.8+4)

42,700 24,200

√√√ √√

OS dividend receivable Bank Cash in transit

34,880 300

√ √

300,300

Equities

112,800 √

Ordinary share capital Retained profit √ General reserve √ Non-controlling interests √ Liabilities Trade Payables Ordinary dividend payables Bill Payables

W 1 W 1 W 1

74,344 21,600 32,516

(19.48+11.9+2.4)-0.7 (6+2+0.9)-1.6-0.36-0.18 (12.3+6+2.1)-1.2

33,080 6,760 19,200

√√ √√√√ √√

300,300 -

28√ (24+28 = 52√ X ½ = 26 Marks) (TOTAL = 35 Marks)...