QUESTION 1
On 1 January 2020, Raqib Construction Bhd. (RCB) acquired a 90% ownership interest in Cider Construction Sdn Bhd (CCSB) for RM500,000. On the same date, RCB also acquired 80% of Gary Construction Sdn Bhd (GCSB) for RM300,000. The net assets on the date of purchase and year-end for both CCSB and GCSB were as follows:
| CCSB | GCSB | |||
| 1/1/2020 | 31/12/2022 | 1/1/2020 | 31/12/2022 | |
| RM | RM | RM | RM | |
| Other Components of Equity | 50,000 | 300,000 | 80,000 | 250,000 |
| Retained Earnings | 10,000 | 500,000 | 40,000 | 300,000 |
On 30 September 2022, RCB disposed of 100,000 shares of its interest in CCSB for RM400,000. RCB received cash for disposal. The following were the accounts balances (extract) taken from the records of the three companies as at 31 December 2022.
| RCB (RM’000) | CCSB (RM’000) | GCSB (RM’000) | |
| Net Income before Tax | 1,300 | 500 | 250 |
| Tax Expenses | (300) | (100) | (50) |
| Net Income after Tax | 1,000 | 400 | 200 |
| Share Capital of RM1 each | 5,000 | 400 | 200 |
| Retained Earnings | 3,000 | 500 | 300 |
| Other components of Equity | 1,100 | 300 | 250 |
| Sales of Shares – Suspense | 400 | – | – |
| Non-current Liabilities | 1,000 | 600 | 450 |
| 10,500 | 1,800 | 1,200 | |
| Investment at a cost: | |||
| Subsidiaries | 800 | – | – |
| Quoted Shares | 100 | ||
| Other Assets | 9,600 | 1,800 | 1,200 |
| 10,500 | 1,800 | 1,200 |
Additional information:
- The shareholders’ funds are assumed to be representative of the fair values of the identifiable assets of CCSB and GCSB at the date of It is the group policy to allocate goodwill to Non-Controlling Interest (NCI) and there was no impairment of goodwill for the current year.
- During the year RCB bought merchandise from GCSB for RM500,000. The year-end inventory of RCB included RM100,000 purchased from The inventory cost to GCSB was RM50,000.
- RCB would like to write down their Investment in Quoted shares by RM20,000 citing a reduction in value as the reason.
Required:
- State which MFRS you will use in accounting for the Investment in Quoted Shares. Write the accounting treatment that you will do for the Investment as per additional information (3) above.
- Compute the Group’s gain or loss on
(4 marks)
(6 marks)
- Calculate the goodwill, pre- and post-acquisition reserves for the NCI that the group will recognize in the consolidated financial statement. The group policy is to use the full goodwill method.
- Prepare journal entries to consolidate the Show all your workings.
- Consolidate the Group as of 31 December 2022 using the worksheet
Answers to Above Questions on Accounting
Answer 1
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