Exercise 3_1 On 1 January 2007, Suria Bhd acquires a 10% equity interest in Purnama Bhd for a cash consideration

of RM18,000,000. The interest is classified as available for sale (AFS) investment and changes in fair value are taken directly to other comprehensive income and retained in a fair value reserve. On 1 January 2009, Suria Bhd acquires another 50% interest in the equity shares of Purnama Bhd for a consideration of RM120,000,000. On this date, Suria had gains effective control of Purnama Bhd. For this acquisition, the fair value of Purnama Bhd, based on the market approach, is estimated at RM400,000,000. Immediately prior to this acquisition, Suria Bhd values the AFS investment to its market value and credits the change in value to other comprehensive income and retains it in fair value reserve. It has not recognized any gain on remeasurement of this AFS investment when it is reclassified to investment in subsidiary on the acquisition date. The financial statements of Suria Bhd and Purnama Bhd for the year ended 31 December 2009 are as follows: Statement of Comprehensive Income
Suria Bhd (RM000) Purnama Bhd (RM000) 90,000 24,000 66,000 66,000

Profit From Operations

Tax Expense

Profit After Tax Other comprehensive income: Fair value gain of AFS investment Total comprehensive income

150,000 39,000 111,000 22,000 133,000

Statement of Changes in Equity (partial) Beginning retaind profits Profit for the year Ending retained profit
Suria Bh (RM000) 189,000 111,000 300,000 Purnama Bhd (RM000) 84,000 66,000 150,000

Statement of Financial Position Share capital of RM1.50 each Fair value reserve
Retained profits Suria Bhd (RM000) 300,000 22,000 300,000 622,000 160,000 462,000 622,000 Purnama Bhd (RM000) 150,000 150,000 300,000 300,000 300,000

Investment in Purnama Bhd Sundry net assets

REQUIRED: (a) (b) (c) (d) (e) (f) Calculate the goodwill on combination as at 1 January 2009. Compute the gain arising from reclassifying the AFS investment. Prepare the relevant consolidation journal entries for the year ended 31 December 2009. Prepare the Consolidated Statement of Comprehensive Income for the year ended 31 December 2009. Prepare the Consolidated Statement of Changes in Equity (partial) for the year ended 31 December 2009. Prepare the Statement of Financial Position as at 31 December 2009.

Exercise 3_2 On 1 January 2009, TAC Bhd acquired a 60% interest in the equity capital of SAS Bhd for a consideration of RM24 million. The remaining 40% non-controlling interest were measured at fair value as RM8 million. The share capital and retained earnings of SAS Bhd on that date were RM12,000,000 and RM6,000,000 respectively. The company uses the fair value method to measure the non-controlling interest.

On 1 January 2010, TAC Bhd acquired another 20% interest in the equity capital of SAS Bhd paying RM10 million cash.

The account for the two companies for the year ended 31 December 2010 were as follows:

Statement of Comprehensive Income TAC Bhd RM000 40,000 (20,000) 20,000 54,000 74,000 SAS Bhd RM000 24,000 (10,000) 14,000 12,000 26,000

Profit before tax Tax expenses Profit for the period Retained earnings brought forward Retained earnings carried forward

Statement of Financial Position TAC Bhd RM000 34,000 70,000 104,000 30,000 74,000 104,000 SAS Bhd RM000 36,000 36,000 10,000 26,000 36,000

Investment in SAS Bhd, at cost Sundry net assets Share capital Retained earnings

REQUIRED:

(a) (b)

Calculate the movement in equity arising from the acquisition of shares in SAS Bhd. Prepare the consolidated journal entries of TAC Bhd for the financial year 2010.