CONFIDENTIAL AC/DEC 2019/FAR410

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE FINANCIAL ACCOUNTING AND REPORTING 1

COURSE CODE FAR410

EXAMINATION DECEMBER 2019

TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. AnswerALL questions in the Answer Booklet. Start each answer on a new page.
3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper

ii) an Answer Booklet - provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 8 printed pages
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CONFIDENTIAL AC/DEC 2019/FAR410

QUESTION 1

ProPoint Bhd is a company incorporated in Malaysia and its principal activity is to purchase
and sell tiles in Northern region. During five years of its operation, ProPoint Bhd had
received good responses from their loyal and potential customers. The company's trial
balance as at 30 June 2019 was as follows:

DEBIT CREDIT
RM'000 RM'000
Preference share 125,000
Ordinary share 320,170
Retained earnings as at 1 July 2018 135,800
Investment income 8,800
7% debenture 15,000
Accumulated depreciation as at 1 July 2018:
Building 28,200
Plant and machinery 17,640
Motor vehicle 4,500
Revenue 324,000
Trade receivables and payables 6,670 6,890
Cost of sales 139,250
Salaries and wages 14,240
Administration expenses 27,650
Selling and distribution expenses 21,470
Advertising expenses 8,730
Interim preference dividend 10,000
Interim ordinary dividend 8,880
Debenture interest 1,050
Auditors' fees 1,200
Bank 28,700
Directors' remuneration 13,500
Tax paid 7,880
Investment 67,680
Land 288,600
Building (cost) 188,000
Plant and machinery (cost) 58,800
Motor vehicle (cost) 45,000
Inventories as at 30 June 2019 48,700
986,000 986,000

Additional information:

1. On 30 June 2019, inventories costing RM20,000,000 were damaged. It could be sold

for RM4,000,000 with further costs to be incurred for the inventories to be in sale
condition amounting RM500.000.

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2. The directors decided to revalue the land in line with recent changes in market value.
The value of land was increased by RM1,000,000 on 30 June 2019. The revaluation
amount has not been recorded by the company.

During the year, the company acquired a building costing RM12,780,000 by cash. The
transaction has not been recorded by the company.

On 1 July 2018, one unit of motor vehicle was disposed at a loss of RM100,000. The
motor vehicle cost was RM1,000,000 and its accumulated depreciation was
RM600,000. The transaction has not been recorded yet by the company.

Depreciation expenses is to be included as part of the administrative expenses except

for depreciation on motor vehicle. The property, plant and equipment were depreciated
using the following bases:

Motor vehicles 20% per annum using the reducing balance method on
yearly basis
Building 5% per annum using the straight line method on yearly
basis
Plant and machinery 10% per annum using the straight line method on yearly
basis

3. As at year end, directors' remuneration of RM9,800,000 and investment income of

RM2,400,000 were still accrued.

4. On 30 June 2019, the company discovered that one of its credit customers owing
RM60.000 manage to settle only RM20.000 of the amount due to financial difficulties
faced by the company. After analysing the credit risk of trade receivables, the
management assessed the amount of specific allowance for doubtful debt at the end of
the accounting period was RM500.000. No records had been taken into consideration.

5. The current year tax was estimated at RM6,380,000.

Required:

Prepare the following financial statements in accordance with the requirements of the
Companies Act 2016 and approved accounting standard for publication purposes:

a. Statement of Profit or Loss and Other Comprehensive Income for the year ended 30
June 2019.
(11 marks)
b. Statement of Changes in Equity for the year ended 30 June 2019.
(4 marks)
c. Statement of Financial Position as at 30 June 2019.
(9 marks)
d. Notes on Property, plant and equipment.
(6 marks)
(Total: 30 marks)

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QUESTION 2

Wawasan Bhd is principally engaged in purchasing and selling of imported cars. On 3

September 2018, Wawasan Bhd acquired a two-storey building in Kuala Lumpur. The first
floor is used as a showroom and retail outlet and the second floor is occupied by Wawasan
Bhd's management for administrative purposes. The following are details of the acquisition
of the new building:

RM
Purchase price 10,300,000
(including non-refundable purchase taxes of RM100,000)
Rebates 50,000
Legal fees 10,000
Title fees 5,000
Survey cost related to the acquisition 2,500

The purchase agreement stated that paymentfor the acquisition of the new building shall be
made in full on 31 January 2019. Annual maintenance cost of the building is estimated to be
RM15,000. The cost of the building is attributed to its significant components as follows: land
(40%>), building structure (50%) and building equipment (10%). The depreciation methods
and the useful life used for the classes of property, plant and equipment are as follows:

Method Useful life/Rate

Buildings structure Straight line 50 years
Building equipment Reducing balance 5% per annum

It is the policy of Wawasan Bhd to depreciate its building based on period of ownership.
Land is not depreciated. The company closes its books on 30 June every year.

Required:

a. Explain briefly whether Wawasan Bhd should classify the building as an item of
property, plant and equipment in accordance with MFRS 116 Property, Plant and
Equipment.
(4 marks)

b. Explain elements of cost of the building acquired by Wawasan Bhd.

(3 marks)

c. The cost of an item of property, plant and equipment shall include directly attributable
expenditure. Explain the term "directly attributable expenditure".
(3 marks)

d. Calculate the initial cost of the building as at 3 September 2018.

(3 marks)

e. Prepare an extract of statement of profit or loss for the year ended 30 June 2019 to
show depreciation expense for building equipment. (Show all workings)
(3 marks)

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CONFIDENTIAL AC/DEC 2019/FAR410

f. Wawasan Bhd had an existing building which was purchased in 1990. The cost of the
existing building as at 1 July 2018 was RM15,000,000 and accumulated depreciation
as at that date was RM7,200,000. Due to lack of proper maintenance of the old
building, the company intends to sell it. On 4 July 2018, Wawasan Bhd sold the old
building for RM9,000,000. The estate agent retained 10% of the proceeds from the
sale as selling commission. Legal fees in respect of the sale was RM8,000.

i. Explain whether the old building shall be derecognised on 4 July 2018.

(4 marks)

ii. Discuss on the relevant accounting treatment for any gain or loss on
derecognition of the old building.
(5 marks)
(Total: 25 marks)

QUESTION 3

Creative Bhd is a dealer of hardware ranging from grass cutter to chain saw. The following
information relates to the unsold products as at 30 June 2019:

Group Item No. of Cost per Net realisable

units unit value per unit
Ordinary 30 RM197 RM150
Grass cutter
Heavy duty 15 RM265 RM280
Ordinary 100 RM46 RM40
Hand saw
Heavy duty 75 RM62 RM55
Ordinary 18 RM250 RM250
Chain saw
Heavy duty 29 RM300 RM317

Required:

a. Give reasons why hardware products stated above are inventories in accordance with
MFRS 102 Inventories.
(1 mark)

b. Determine the value of the inventories as at 30 June 2019 using group-by-group basis.
(9 marks)

c. Briefly explain the accounting treatment for the written down amount to net realisable
value based on your calculation in (b) above.
(2 marks)
(Total: 12 marks)

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QUESTION 4

The objective of MFRS 15 Revenue from Contracts with Customers is to establish principles
that an entity shall apply to report useful information to users of financial statements about
the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's
contracts with customers.

Required:

a. Define 'contract' in accordance with MFRS 15 Revenue from Contracts with

Customers.
(2 marks)

b. List any three (3) criteria of a contract that must be met before applying revenue
guidance under MFRS 15 Revenue from Contracts with Customers.
(3 marks)

c. On 1 January 2019, CallTone Bhd have a contract with Salim. Salim has signed a
twelve-month telecommunication plan. The terms of the plan are:

1. Salim's monthly fixed fee is RM150.

2. Salim receives a free smart phone at the inception of the plan.

Customers may purchase the same smart phone from CallTone Bhd for RM700
without the payment plan. They may also enter into fixed payment plan without a smart
phone for RM120 per month. The company closes its accounts on 30 June every year.

Prepare the journal entries to show how CallTone Bhd should recognise revenue from
this plan in accordance with MFRS 15 Revenue from Contracts with Customers:

i. on 1 January 2019
ii. on 31 January 2019
(7 marks)
(Total: 12 marks)

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QUESTION 5

The following is an extract of Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2019 and the draft Statement of Financial Position of Greyland
Bhd as at 30 June 2018 and 2019.

Statement of Profit or Loss and Other Comprehensive Income (extract)

for the year ended 30 June 2019
RM'000
Revenues 14,400
Cost of sales (5,700)
Other operating incomes 374
Administrative expenses (5,940)
Profit for the year 3,134

Statement of Financial Position as at 30 June

2019 2018
RM'000 RM'000
Non-current assets
Property, plant and equipment 16,400 11,400
Investment 920 810
Intangible assets 2,800 1,800

Current assets
Inventories 1,020 1,200
Accounts receivable 8,540 9,300
Short term investment 340 270
Investment income receivable 40 100
Tax recoverable 240
Cash at bank 11,400 13,000
41,700 37,880

Financed by
Share capital 25,000 18,000
Revaluation reserve 2,400
Retained profits 5,760 4,100

Non-current liabilities
6% debentures 1,000 600
8% bank loan 1,760 2,400

Current liabilities
Accounts payable 5,540 5,640
Accrued operating expenses 80 120
Bank overdraft - 6,640
Interest payable 160 200
Tax payable - 180
41,700 37,880

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The following information is relevant:

1. Administrative expenses include the followings:

RM
Tax expense 1,000,000
Interest expense 130,000
Depreciation on property, plant and equipment 260,000
Loss on disposal of investment 30,000

2. Investment costing RM240,000 was sold at a loss of RM30.000.

3. A motor van with carrying amount of RM400.000 was sold and there was revaluation
on land during the year.

4. Other operating income include gain on sale of motor van of RM54.000 and
investment income of RM320.000.

5. Short term investment qualifies as cash and cash equivalent.

Required:

Prepare a Statement of Cash Flows of Greyland Bhd for the year ended 30 June 2019 using
indirect method in accordance with MFRS107 Statement of Cash Flows.
(Total: 21 marks)

END OF QUESTION PAPER

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