Accounting Assignment, UM, Malaysia Mantera Bhd was incorporated in 2002 and the company’s core businesses are manufacturing, importing, exporting, distributing

QUESTION 1

Mantera Bhd was incorporated in 2002 and the company’s core businesses are manufacturing, importing, exporting, distributing, and marketing electrical home appliances for, domestic and international markets. Mantera Bhd has adopted a multi-platform marketing strategy through a strong distribution network to cater to different product categories and market segments. Mantera Bhd has equity interests in Semerah Bhd, Nilam Bhd, Jasmin Bhd, and Santai Bhd.

Financial Statements

The following are the companies’ financial statements for the Year ended 30 June 2022.

Investment in Semerah Bhd

Mantera Bhd acquired all ordinary shares of Semerah Bhd on 1 July 2019, when the retained profit and other reserves of Semerah Bhd were RM27,000,000 and RM15,000,000, respectively. The issued ordinary shares in Semerah Bhd were 120,000,000 units. The cost of the business combination was discharged by an issue at a fair value of 72,000,000 ordinary
shares in Mantera Bhd. The fair value of Mantera Bhd’s ordinary shares on that date was RM3.00 each. Mantera Bhd also acquired 10% of preference shares in Semerah Bhd for RM5,000,000.

At the date of acquisition, the carrying amount of Semerah Bhd’s net assets reflects their fair value except for its freehold land. The fair value of the freehold land was RM7,500,000 higher than its carrying amount and has not yet been recorded.

On 1 October 2021, the board of directors of Mantera Bhd decided to dispose of 20% of its interests in the ordinary shares of Semerah Bhd to Sura Bhd for RM42,500,000. The disposal transaction has not been recorded.

Investment in Nilam Bhd

Mantera Bhd acquired 70% of the ordinary shares of Nilam Bhd for a cash consideration of RM100,000,000 on 1 July 2021. The ordinary shares issued by Nilam Bhd are 75,000,000 units.

On 1 April 2022, Mantera Bhd acquired another 10% of the ordinary shares of Nilam Bhd for a cash consideration of RM17,500,000. This transaction has not yet been recorded.

Investment in Jasmin Bhd

On 1 January 2022, Mantera Bhd acquired a 60% interest in Jasmin Bhd. The consideration transferred was satisfied by issuing 37,500,000 ordinary shares and 5,000,000 preference shares in Mantera Bhd. The fair values of these shares were RM1.20 and RM1, respectively. The fair value of Jasmin Bhd’s net assets on the date of acquisition was equal to the carrying amount.

Investment in Santai Bhd

On 1 October 2021, Mantera Bhd acquired a 25% interest in Santai Bhd for a cash consideration of RM10,000,000. Mantera Bhd had a significant influence over the operating and financial activities of Santai Bhd. The fair value of Santai Bhd’s net assets on this date was equal to the carrying amount.

QUESTION 2

Lively Bhd has developed a new business model whereby it sells music licenses to other companies, delivering digital music to consumers.

Lively Bhd has agreed to work with Go Bhd to develop a new music platform. On 31 December 2020, the companies created a new entity, Softech Bhd, with equal shareholdings and shares in profit. Lively Bhd has contributed its intellectual property through employee expertise, cryptocurrency with a carrying amount of RM3 million (fair value of RM4 million), and an office
building with a carrying amount of RM6 million (fair value of RM10 million). The cryptocurrency has been recorded at cost in Lively Bhd’s financial statements. Go Bhd has contributed technology and marketing expertise. The board of Softech Bhd will comprise directors appointed equally by Lively Bhd and Go Bhd. Decisions are made by a unanimous vote.

Answer

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