1
AC/TEST1/OCT2020/FAR610
UNIVERSITI TEKNOLOGI MARA
TEST 1
COURSE
:
ADVANCED FINANCIAL ACCOUNTING AND
REPORTING 1
COURSE CODE
:
FAR610
DATE
:
19 DECEMBER 2020 (SATURDAY)
TIME
:
1 HOUR 30 MINUTES
INSTRUCTIONS TO CANDIDATES
1.
2.
3.
4.
This question paper consists of one (1) question.
The answer should be in English.
Show your workings where necessary.
The answer must be in HANDWRITTEN.
This examination paper consists of 4 pages
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AC/TEST1/OCT2020/FAR610
QUESTION
Palie Bhd is the industry leader in production of herbs products. It has expanded its business
by investing in Suria Bhd and Lela Bhd. The statements of financial position of Palie Bhd,
Suria Bhd and Lela Bhd as at 31 December 2019 are as follows:
ASSETS
Property, plant and equipment
Investment in Suria Bhd:
3,200,000 Ordinary shares
400,000 Preference shares
Investment in Lela Bhd
Other investments
Intangibles
Inventory
Bills receivable
Trade receivables
Ordinary dividends receivable
Bank
TOTAL
EQUITIES AND LIABILITIES
Ordinary shares at issue price of RM1
10% Preference shares at issue price of RM1
Other reserves
Retained profit as at 1 January 2019
Profit for the year ended 31 December 2019
Long Term loan
Bills payable
Trade payables
Ordinary dividends payable
TOTAL
Palie Bhd
RM ‘000
Suria Bhd
RM ‘000
Lela Bhd
RM ‘000
7,000
1,400
2,500
3,750
400
3,000
150
180
1,500
360
560
190
380
17,470
-
-
3,380
300
40
1,100
150
370
80
100
6,920
150
860
80
420
10
140
4,160
11,300
1,500
2,100
1,070
440
380
680
17,470
4,000
1,000
340
700
350
110
220
200
6,920
2,500
250
300
250
500
180
50
130
4,160
Acquisition of Suria Bhd
Palie Bhd acquired the ordinary shares and preference shares in Suria Bhd on 1 January
2017 on the following terms:
i.
The consideration for the ordinary shares acquired was settled by Suria Bhd’s
shareholders accepting 800,000 ordinary shares of Palie Bhd valued at RM2 each,
and
ii.
Initial cash payment of RM2,150,000. The cash payment had been recorded by Palie
Bhd.
On the date of acquisition, the other reserve and retained profit of Suria Bhd were RM50,000
and RM480,000 respectively. No new shares were issued by Suria Bhd since the acquisition
date.
On 31 December 2019, goodwill on acquisition of Suria Bhd has been impaired by
RM20,000.
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AC/TEST1/OCT2020/FAR610
Acquisition of Lela Bhd
On 1 January 2019, Palie Bhd and Suria Bhd acquired 30% and 40% of the issued ordinary
shares of Lela Bhd respectively when the other reserve of Lela Bhd was RM130,000. The
net assets of Lela Bhd on 1 January 2019 were stated in the books at their fair values except
for:
i.
A building whose fair value was RM200,000 in excess of its book value. No
adjustment was made in the books of Lela Bhd to reflect this value. The remaining
life of the building was 25 years.
ii.
A patent of fair value RM4,000,000 which was not recorded in the books since the
right was granted at no cost to Lela Bhd. The patent right should be amortised for 10
years.
Acquisition of Aman Bhd
The other investment of Palie Bhd refers to a 25% interest in the equity shares of Aman Bhd
which was acquired on 1 April 2019. Aman Bhd’s profit for the year ended 31 December
2019 was RM260,000, in which RM60,000 of this profit was made before 1 April 2019. The
investment in Aman Bhd was assessed to be impaired by RM10,000.
Inter-company transactions
1)
Included in the profit for the year of Palie Bhd is the unrealised profit of RM80,000 on
the sale of land to Suria Bhd.
2)
Palie Bhd sold RM400,000 worth of goods to Aman Bhd at cost plus 25% in the
month of July 2019. RM200,000 of these goods remained in the inventory of Aman
Bhd at 31 December 2019.
3)
Palie Bhd and Suria Bhd have recorded ordinary dividends receivable from their
respective investments.
4)
RM200,000 of the long-term loan of Lela Bhd was a loan obtained from Palie Bhd.
Palie Bhd had included this amount as part of its bill receivables.
5)
During the year, Suria Bhd sold goods of RM100,000 on credit to Palie Bhd. All
these goods were sold by Palie Bhd to third parties during the year. As at 31
December 2019, Palie Bhd paid RM30,000 for the goods purchased from Suria Bhd,
but Suria Bhd only received RM20,000 thereof.
Selected Accounting Policies
1)
2)
3)
The non-controlling interest is measured in proportion to the fair value of the net
assets of the subsidiary on acquisition date.
It is the group’s policy to provide depreciation for all assets using the straight-line
method and full year depreciation is to be provided in the year of purchase and none
in the year of disposal.
All profits are deemed to accrue evenly throughout the year, unless told otherwise.
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AC/TEST1/OCT2020/FAR610
Required:
a.
Compute goodwill/bargain purchase on the acquisition of Suria Bhd.
(4 marks)
b.
Compute goodwill/bargain purchase on the acquisition of Lela Bhd.
(5 marks)
c.
Compute the carrying value of investment in associate as at 31 December 2019.
(3 marks)
d.
Compute the group retained profit, group other reserve and non-controlling interest
using schedule form.
(10 marks)
e.
Prepare a Consolidated Statement of Financial Position for Palie Bhd’s Group as at
31 December 2019.
(18 marks)
(Total: 40 marks)
GOOD LUCK
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