CONFIDENTIAL ACIJAN 2018/FAR210 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE FINANCIAL ACCOUNTING 3 COURSE CODE FAR210 EXAMINATION JANUARY 2018 TIME 3 HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of five (5) 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 the invigilator gives permission. 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 7 printed pages (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 2 QUESTION 1 ACIJAN 2018/FAR210 Tunas Bhd is a wholesale company involving in purchasing and selling of goods to hypermarkets. The following is the trial balance of Tunas Bhd as at 31 December 2017: _ Debit (RM) Credit (RM) Sales revenue 65,500,000 Cost of sales 12,450,000 Sannin Selling and distribution expenses 9,700,000 _| Advertising expenses _ 650,000 - Administrative expenses _ 1,580,000 Audit fees — 57,000 | Directors’ remuneration 1,400,000 Redeemable preference dividend paid 500,000 Freehold land (cost at 1 January 2017) 102,900,000 | Building (carrying value at 1 January 2017) 22,500,000 | | Motor vehicles (carrying value at 1 January 2017) 2,400,000 Furniture and fittings (carrying value at 1 January 2017) _ 1,800,000 a Intangible asset 1,250,000 Trade receivables and trade payables 4,200,000 5,680,000 Return inwards 260,000 Bank 501,753,000 } Inventories (at cost) _ 7,780,000 Interim ordinary dividends paid 12,000,000 mi Tax paid — 5,600,000 | ‘Accumulated losses (at 1 January 2017) 2,400,000 Ordinary share capital (at RM1) ‘600,000,000 5% Redeemable preference share 20,000,000 691,180,000 | 691,180,000 Additional information: 1. On 1 December 2017, the freehold land was revalued to RM104,000,000. The directors decided to incorporate the revalued amount in the books. 2. Asat year end, it was discovered that inventories totalling RM560,000 can only be sold at only RM400,000. 3. The costs of non-current assets as at 1 January 2017 are as stated below: RM Freehold land 102,900,000 Building 25,000,000 Motor vehicles 3,000,000 Furniture and fittings 2,000,000 (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 3 ACIJAN 2018/FAR210 7, The company has yet to provide for the current year's depreciation. The depreciation policy of the company is as follows: Building To be depreciated over its useful life of 50 years Motor vehicles 20% per annum on carrying value Freehold land Freehold land is not to be depreciated Furniture and fittings 40% per annum on cost Depreciation on motor vehicles was to be treated as selling and distribution expenses. The tax recoverable for the current accounting period was RM320,000. Provisions are to be made as follows: The advertising expenses included RM120,000 for the billboard advertisement for the period of 6 months starting from 1 November 2017 to 30 April 2018. li. | On 31 December 2017, the directors declared the final redeemable preference dividends and 2.5% final ordinary dividends. The directors decided to transfer RM450,000 from retained profits to general reserves. On 18 December 2017, the company issued a cheque amounted to RM15,000 to PT Trading to settle the amount owed. Required: a. b. Prepare the following financial statements in accordance with the requirements of the Companies Act 2016, MFRS 101 Presentation of Financial Statements and other relevant Malaysian Financial Reporting Standard: Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2017. (10 marks) i. Statement of Changes in Equity for the year ended 31 December 2017. (4 marks) li. Statement of Financial Position as at 31 December 2017. (9 marks) Prepare Notes on Property, Plant and Equipment. (7 marks) (Total: 30 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 4 ACIJAN 2018/FAR210 QUESTION 2 Yangyang Bhd had purchased a unit of specialised heavy equipment from Pan Engineering Bhd to be used in producing the company’s product, BLITZ, on 1 January 2015. Details of costs incurred are as follows: RM Purchase price 600,000 Excise duty 15,000 Engineer's fees 12,000 Steel reinforcement costs 6,000 Maintenance and service contract for one (1) year 5,000 Shipping and transport costs 5,000 Pre-production testing (necessary to bring the 5,000 equipment to its working condition) Yangyang Bhd received a trade discount of 10% on the purchase price. The specialised heavy equipment has an estimated useful life of five years with 10% residual value (from cost) and to be depreciated on straight-line method based on monthly basis. The fair value of the specialised heavy equipment is RM400,000 on 1 January 2017. The board of directors plans to incorporate this value in the statement of financial position and credited the surplus or deficit to the statement of profit or loss and other comprehensive income. The residual value will be eliminated as the revalued amount reflects the current market condition of the specialised heavy equipment. Due to the requirement of the industry, the specialised heavy equipment has to undergo a major inspection for every three (3) years which will start in 2018, The company closes its book on 31 December each year. Required: a. i Briefly explain the recognition criteria of the specialised heavy equipment as an asset. (2 marks) ii. Describe the criteria of property, plant and equipment met by the specialised heavy equipment in accordance to MFRS 116, Property, Plant and Equipment. (3 marks) b. Regular inspection is identified as subsequent cost on property, plant and equipment. Briefly explain the accounting treatment of the major inspections cost on the specialised heavy equipment. (4 marks) c, Residual value is one of the determinants in computing deprecation charge. Briefly explain the term ‘residual value’ (3 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 5 ACIJAN 2018/FAR210 d. Briefly explain the initial cost of the purchased specialised heavy equipment. (2 marks) li, Calculate the initial cost of the purchased specialised heavy equipment. (4 marks) ll, Calculate the accumulated depreciation expense for the specialised heavy equipment as at 31 December 2016. (2 marks) ei, __ Discuss the reasons why a company revalue its property, plant and equipment. (5 marks) Advise Yangyang Bhd on the accounting treatment of the revaluation of its specialised heavy equipment (occurred on 1 January 2017). Support your answer with calculation. (5 marks) (Total: 30 marks) QUESTION 3 Cantik Design is a manufacturer of female attires which has its own factory in Seri Iskandar. The business sells its products on cash and credit basis. Below are some of the transactions related to the sales of goods: 11 June 2017 ee Transactions — ‘old goods on credit to Hazra Fashion worth RM15,000. The cr term offered was 2/10 net 90 days. 19 June 2017 | Received a cheque amounting RM14,700 from Hazra Fashion for settlement of the account. 14 October 2017 | Sold goods on credit to Anggun Boutique worth RM30,000. Trade discount of 2% was given. The credit term offered was 5/15 net 50 days. Required: a. 77 November | Huwaina Fashion purchased goods on credit worth RM7,000 from 2017 Cantik Design. 3% of trade discount was given. a | Based on MFRS 139 Financial Instrument: Recognition and Measurement, explain whether the business transactions on 11 June, 14 October and 11 November 2017 give rise to financial assets. (3 marks) Explain how Cantik Design should measure the amount to be recorded for each sales transaction (2 marks) (© Hak Cipta Universiti Teknolog! MARA CONFIDENTIALCONFIDENTIAL 6 ACIJAN 2018/FAR210 ¢. Based on the transaction above, decide whether Cantik Design should derecognise Hazra Fashion from its accounts receivable. (5 marks) d. Cantik Design is preparing its financial statement for the year ended 31 December 2017. At this date, the total balance of accounts receivable is RM80,000. The balance of allowance for impairment of trade receivables on 1 January 2017 was RM3,000. Cantik Design provides allowance for impairment of trade receivables at 3% of its accounts receivable. During the current year, an amount of RM1,000 was written off as bad debts. In addition, on 28 December 2017 a receivable of RM800, which was previously recognised as bad debt, has been paid. No records were made for these amounts. Propose to the management of Cantik Design on the amounts to be disclosed in Statement of Profit or Loss and Statement of Financial Position as at 31 December 2017. (5 marks) (Total: 15 marks) QUESTION 4 EO System Bhd is a company specialising in computer sales and services. The computers are for offices and the education industry and are marketed throughout the northern region of Malaysia. The company's financial year ends on 31 December every year. EO System Bhd is using group of similar items basis in valuing their inventory. The following information relates to computers which remained unsold for EO System Bhd as at 31 December 2017. Item Group Cost(RM) Net realisable value(| ‘Acer A 20,000 21,000 HP A_ | 18,000 19,500 | “Tenove A 71,000 10,000 : Sony B 18,000 18,900 ‘Asus B 25,200 27,300 Mac | B 13,200 _ 12,000. Toshiba | —C 22,000 23,100 Apple c 15,600 16,900 ‘Samsung Ce 12,400 9,000 Required: a. State whether the unsold computers are items of inventory of EO System Bhd in accordance with MFRS 102 Inventories. (3 marks) (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL 7 ACIJAN 2018/FAR210 b, Identify the circumstances in which the written down of inventories to net realisable value using group of similar item basis may be more appropriate than item by item basis. (3 marks) ©. Determine the value of the closing inventory as at 31 December 2017 and the amount written down. (4 marks) (Total: 10 marks) QUESTION 5 A computer virus destroyed important financial accounting information pertaining to Inspirasi Tapah Bhd's equity section. For the year ended 31 December 2017, the only data you can recover from the computer backup is as follows: - — 1__RM 10% debentures 20,000,000 8% redeemable preference shares 10,000,000 5% preference shares 15,000,000 Ordinary shares 70,000,000 Share premium 5,000,000 Retained profit at 31 December 2017 12,230,000 Capital redemption reserve 2,000,000) Transfer from profit to general reserve during the year 3,000.000 Trade and other receivables 4,000,000 | interim ordinary dividend — 7,880,000 ‘Annual 8% redeemable preference dividend (declared on 15 December ‘800,000 2017) — ‘Annual 5% preference dividend payable (declared on 15 December 2017) 750,000 Required: a. State any THREE (3) criteria of ordinary shares. (3 marks) b. List any THREE (3) items of equity of Inspirasi Tapah Bhd (3 marks) c. i. Differentiate between distributable and non-distributable reserves. ii. Give ONE (1) example each from Inspirasi Tapah Bhd. (4 marks) d. Compute the balance of equity in Inspirasi Tapah Bhd as at 31 December 2017. (6 marks) (Total: 15 marks) END OF QUESTION PAPER (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIAL