far 450

Topics: Balance sheet, Generally Accepted Accounting Principles, Accounts receivable Pages: 23 (1301 words) Published: November 24, 2013
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From the following balance sheets, income statements and additional information, prepare a consolidated balance sheet, consolidated income statement and statement of changes in equity of Big Bhd Group.

Balance sheet as at 31 March 2006

Big Bhd

Small Bhd

RM

RM
Non current assets (net book value)
1,000,000

846,000
Investment in Big Bhd at cost:

- 300,000 Ordinary shares
430,000

- 40,000 10% Preference shares
50,000

- RM40,000 10% Debentures
40,000

Current assets

Inventory
70,000

55,000
Bills receivable
25,000

20,000
Debtors
40,000

30,000
Bank
30,000

20,000
Current liabilities

Creditors
(140,000)

(50,000)
Bills payable
(30,000)

(25,000)
Ordinary dividend payable
(57,600)

(28,800)
Preference dividend payable

(7,200)
Debenture interest payable

(10,000)

Net assets
1,457,400

850,000

Financed by:

Ordinary share capital
1000,000

400,000
10% Preference share capital

100,000
Profit and loss
457,400

250,000
10% Debentures

100,000

1,457,400

850,000

Income statement for the year ended 31 March 2006

Big Bhd

Small Bhd

RM

RM
Sales
2,368,000

2,149,100
Cost of sales
(1,200,000)

(1,197,800)
Gross profit
1,168,000

951,300
Expenses
(735,000)

(620,000)
Profit before tax
433,000

331,300
Taxation
(108,000)

(145,300)
Profit after tax
325,000

186,000
Preference dividend

(7,200)
Ordinary dividend
(57,600)

(28,800)
Retained profit for the year
267400

150,000
Retained profit b/f
190,000

100,000
Retained profit c/f
457,400

250,000

Additional information:

Big Bhd acquired 300,000 of Ordinary shares, 40,000 of 10% Preference shares and RM40,000 of 10% Debentures of Small Bhd on 1 April 2005 when the profit and loss balance of the company was RM100,000. On 15 April 2005, Small Bhd declared and paid 5% ordinary dividend net off tax for the year ended 31 March 2005. Big Bhd has credited this dividend into its income statement. For the purpose of purchasing the shares in Small Bhd, the entire non-current assets of Small were revalued to RM1,000,000 on 1 April 2005. However, Small Bhd has not recorded this transaction in its books. It is the group policy to depreciate its’ non-current assets at 10% using reducing balance method. During the year Small Bhd sold goods worth RM50,000 at cost plus 50% to Big Bhd. Big Bhd managed to sell 60% of the goods before end of the year. Included in the bills payable of Small Bhd was RM10,000 an amount due to Big Bhd. Due to cash problem, Big Bhd had discounted RM6,000 of the bills with a discount house. Big Bhd had not recognised its’ portion of current year dividends and interest from Small Bhd. On 31 March 2006, Small Bhd issued bonus shares of 1 for every 5 shares held out of profit existing on 1 April 2005. Small Bhd has not recorded the issue of bonus shares in its books. Goodwill (if any) is to be capitalised.

Solution

Percentage of shareholding:

Ordinary share capital = 300,000 / 400,000 x 100% = 75%
Preference share capital = 40,000 / 100,000 x 100% = 40%
Debentures = 40,000 / 200,000 x 100% = 20%

1/4/0531/3/06
P&L = 100,000 – 14,400 – 80,000 = 5,600 P&L = 250,000
(Pre-div) (Bonus)
Asset Revaluation Reserve = 60,000

Workings:

Pre-acquisition dividend

Pre-acquisition dividend = RM14,400 (400000x5%x72%)
Big Bhd’s portion = 75% X RM14,400 = RM10,800
Pre acquisition profit = RM100,000 – RM14,400 = RM85,600

Asset revaluation reserve

Date
Net book value
Fair value
Asset Revaluation Reserve
Depreciation
1/4/2005
RM940,000
[846,000X100/90]
RM1,000,000
RM60,000
RM6,000
(under provided)
Current year depreciation
RM94,000
RM100,000

31/3/2006
RM846,000
RM900,000

Bonus shares

Number of bonus shares issued = 400,000 units X 1 / 5 = 80,000 units In RM =...
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