Question 1:Ordinary shares of RM1 eachFVreserves of FA designated at FV through OCIRevaluation reserves300004 000On 1 January 20x1, P Bhd. acquired an 80% interest in the equity capital of S Bhd. for a cashconsideration of RM10 000 000. On this date, the retained profits of S Bhd. were RM3 000000.5 0005 0008 9002 000www4 000Retained profits6 5004890016 5008 00Long-term loansCurrent Liabilities10 000The draft accounts of the two companies for the current year ended 31 December 20x3 areas follows:PayablesTaxation5 0001 2003 500900Statement of Profit or Loss and Comprehensive Incomefor the year ended 31 December 20x3Amount due to P1 500P Bhd.wwwS Bhd.6310032 400wwwRM'000RM'00SalesCost of sales150009 000Additional information:8 0007 0004 000(i)Included in the property, plant and equipment of S Bhd is a freehold land recorded atGross profit5 000a valuation of RM8 000 000. At the acquisition date, this land was recorded at itsOperating expenses(2500)(1 500)historical cost of RM4 000 000 whilst its fair value on that date was RM6 000 000. AnOperating profitFinance cost4 5003 500adjustment of RM2 000 000 revaluation reserve was made in the accounts of S Bhd. to(400)(600)wwwFV gain of financial assetsi2001300600reflectthe fair value at acquisition date.(ii)On 30th of December, S Bhd. sent a cheque of RM500 00 to P Bhd. but thisProfit before taxation5 4003 500transaction was notrecorded by the later until after year end.(iii) It is the group's policy to measure non-controlling interests at its share of net assets.Taxation(1500)(1 000)Profit for the yearOthercomprehension income:Surplus on revaluation reservesCain on3 9002 5002 0001000Required:Gain on FA designated at FV through OCI2 5002 000(a)Using a consolidation worksheet, show the journal entries for eliminations andTotal other comprehensive income4 5003 000adjustments to arrive at the consolidated financial statements of P Bhd.Total comprehensive income for the year8 4005500(b)Present the consolidated financial statements of P Bhd. for the year ended 31wwwMovement in retained profits:Retained profits b/fDecember 20x3.5 0004 000Profit for the yearRetained profits c/f3 9002 5008 9006 500Statement of Financial Positionas at 31 December 20x3P Bhd.S Bhd.RM'000wwwwwRM'000Property, plant and equipment:Freehold land, at valuationOther property, plant and equipmentFA designated at FV through OCiInvestment in S Bhd. (at cost)8 0005 6006 000105001230012000100004480019 600Current assets:InventoriesReceivablesFA designated at FV through P/L5 00051003 0004 0004 1001700Amount due from SBank2 0003 2003 0006310032 400

ConsolidationThe combination of one or two elements is called consolidation. When a company acquires…

Question 1: On 1 January 20x1, P Bhd. acquired an 80% interest in the equity capital of S Bhd. for a cash consideration of RM10 000 000. On this date, the retained profits of S Bhd. were RM3 000 000. The draft accounts of the two companies for the current year ended 31 December 20x3 are as follows: Statement of Profit or Loss and Comprehensive Income for the year ended 31 December 20x3 Ordinary shares of RM1 each Long-term loans 30000 4 000 FV reserves of FA designated at FV through OCI 5000 2000 Revaluation reserves 5000 4 000 Retained profits 8900 6 500 48900 16500 8000 10000 5000 3 500 1200 900 1500 63100 32 400 Current Liabilities Payables Taxation Amount due to P Sales Cost of sales Gross profit Operating expenses Operating profit Finance cost FV gain of financial assets Profit before taxation Taxation P Bhd. RM'000 S Bhd. RM'000 15000 8 000 9000 4000 7 000 5000 (2500) 4 500 (400) (1500) 3500 (600) 600 3500 1300 5400 (1500) (1000) 3900 2500 Additional information: (i) Included in the property, plant and equipment of S Bhd is a freehold land recorded at a valuation of RM8 000 000. At the acquisition date, this land was recorded at its historical cost of RM4 000 000 whilst its fair value on that date was RM6 000 000. An adjustment of RM2 000 000 revaluation reserve was made in the accounts of S Bhd. to reflect the fair value at acquisition date. (ii) on 30th of December, S Bhd. sent a cheque of RM500 000 to P Bhd. but this transaction was not recorded by the later until after year end. (iii) It is the group's policy to measure non-controlling interests at its share of net assets. Required: (a) Using a consolidation worksheet, show the journal entries for eliminations and adjustments to arrive at the consolidated financial statements of P Bhd. Profit for the year Other comprehension income: Surplus on revaluation reserves 2000 1000 Gain on FA designated at FV through OCI 2500 2000 Total other comprehensive income 4500 3000 Total comprehensive income for the year 8400 5500 Movement in retained profits: Retained profits b/f Profit for the year 5000 4000 3900 2500 | Retained profits c/f 8900 6500 (b) Present the consolidated financial statements of P Bhd. for the year ended 31 December 20x3. Statement of Financial Position as at 31 December 20x3 P Bhd. RM'000 S Bhd. RM'000 Property, plant and equipment: Freehold land, at valuation Other property, plant and equipment FA designated at FV through OCI Investment in S Bhd. (at cost) Current assets: 10500 8000 12300 5600 12000 6000 10000 44800 19600 Inventories 5000 4000 Receivables 5100 4100 FA designated at FV through P/L 3000 1700 Amount due from S 2 000 Bank 3 200 3000 63100 32 400