CONFIDENTIAL 1 AC/NOV 2022/FAR320

UNIVERSITI TEKNOLOGI MARA

COMMON TEST

COURSE : FINANCIAL ACCOUNTING 5

COURSE CODE : FAR320
EXAMINATION : NOVEMBER 2022
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of TWO (2) questions.

2. Answer ALL 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.

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CONFIDENTIAL 2 AC/NOV 2022/FAR320

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

This examination paper consists of 4 printed pages

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QUESTION 1

A. Kasturi Bhd actively manufactures and sells electrical appliances for local market. On
1 January 2020, Kasturi Bhd acquired a prototype design and amortized it on a
straight-line basis over its legal life of 10 years. The following costs are incurred:

RM
Purchase price 8,000,000
Import duties 1,500,000
5% trade discount 400,000
Administrative costs 20,000
Professional fees 80,000
Initial operating costs 30,000

During the year ending 31 December 2020, Kasturi Bhd incurred RM70,000 in
developing its own customer lists and estimated its useful life to be 10 years. In
October 2020, Kasturi Bhd sent some of its staff for training and incurred costs of
RM150,000. The expected benefits derived from the training should last for four years.

On 1 July 2021, the fair value of the prototype design was RM8,000,000 and it is
measured using revaluation model.

Required:

i. State any TWO (2) capitalization criteria for an intangible asset arising from
development in accordance with MFRS138 Intangible assets.
(2 marks)

ii. Explain the accounting treatment for the above transactions for the year ended
31 December 2020.
(4 marks)

iii. Show the relevant journal entries to record the above transactions for the year
ended 31 December 2021.
(4 marks)

B. On 1 January 2016, Muaz Bhd acquired a patent costing RM8,000,000. It can be used
by Muaz Bhd for an indefinite period. On 1 January 2019, Muaz Bhd reviewed the
useful life and it was revealed that the economic benefits to be derived from intangible
asset would be 8 years. An impairment test was conducted on 31 December 2021
which determined that the present value of future cash inflows was estimated at 30%
of the initial cost and Muaz Bhd received an offer to purchase the patent for
RM3,000,000.

Required:

Briefly discuss the proper accounting treatment for the patent for the year ended 31
December 2021.
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(2 marks)

C. Semeling Bhd manufactures and sells consumer products. Beginning of 2018,

Semeling Bhd is committed in the research and development project on a new
product. It has allocated an expenditure of RM300,000 per month for this project.
Research phase began on 1 March 2019 for a period of 7 months. Development on
the new product began immediately after the research was considered a success. It
continued throughout the year ended 31 December 2020.

However, the directors of Semeling Bhd were confident of the success and potential
profits of the product at the beginning of April 2020. The commercialization of the
product began in January 2021. The management estimated that the benefits derived
from the new product would be 8 years.

On 1 August 2021, the fair value of the development expenditure was determined to
be RM2,730,500. Semeling Bhd adopts the revaluation model for its intangible assets
and intangible assets will be amortised on monthly basis..

Required:

i. Explain the accounting treatment on the expenditure incurred in the years ended
31 December 2019 and 31 December 2020.
(8 marks)

ii. Prepare the journal entries to record the above transactions for the year ended
31 December 2021.
(5 marks)
(Total: 25 marks)

QUESTION 2

Greenland Bhd engaged in the business of livestock farming which started the business one
year ago. On 1 January 2021 the company held 250 of 1 year old calves. The company had
provided the following information regarding its livestock for the year ended 31 December
2021:

Date Details
1 January 2021 Hold 250 calves aged 1 year old
1 January 2021 Purchased 60 calves aged 1.5 years old
30 June 2021 Purchased 40 calves aged 2 years old
1 July 2021 12 calves were born

Fair value less cost to sell per livestock was as follows:

2021 Details RM
1 January 1 year old 520

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1 January 1.5 years old 550

30 June 2 years old 700
1 July Newborn 500
31 December 1 year old 720
31 December 1.5 years old 780
31 December 2 years old 850
31 December 2.5 years old 900
31 December 6 months old 640
31 December Newborn 600

Required:

i. State THREE (3) agricultural activities that are applicable to MFRS 141 Agriculture.
(3 marks)

ii. Indicate whether the followings are biological assets:

● Palm oil
● Oil palm tree
● Cattle
● Rubber tree
(2 marks)

iii. Compute the revenue from managing the livestock for the year ended 31 December
2021. Show all necessary workings for the changes in the fair value less cost to sell
due to the price changes and physical changes.
(11marks)

iv. Prepare journal entries for the purchase of calves.

(4 marks)

v. Determine the carrying amount of biological assets to be disclosed in the Statement

of Financial Position as at 31 December 2021.
(5 marks)
(Total: 25 marks)

END OF QUESTION PAPER

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