CONFIDENTIAL AC/JUL 2023/FAR210

UNIVERSITI TEKNOLOGI MARA

SUGGESTED SOLUTION

COURSE : FINANCIAL ACCOUNTING3

COURSE CODE . FAR210 | |
EXAMINATION : JULY 2023
TIME : 3 HOURS

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CONFIDENTIAL 2 AC/JUL 2023/FAR210

QUESTION 1

d.

GENIUS BHD
Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 December 2022
RM
Turnover 14,900,000V
Cost of Sales (7.096m + 110k) (7,206,000v)
Gross Profit ' 7,694,000
Decrease in AFITR (115K - 9.70K - 88K) 17,300vv
Administrative cost (2,365,300)
Distribution cost (729,200)
Operating Profit 4,616,800
Finance cost (266,000)
Income from investment 633,000V
Profit before tax 4,983,800
Taxation (1,250,000)v
Net Profit After Tax 3,733,800
Other comprehensive income
Surplus on revaluation (7.2m - 6m) 1,200,000v
Total comprehensive income 4,933,800

Admin exp S&D Finance cost

As per trial balance 1,064,000 620,000 204,800v
Auditors’ fees | 90,000v
Directors’ fees (642,500 + 85,000) 727,500v v
Depreciation: Building (2% x 5,940,000) 118,800v
Plant and machinery (10% x 3,650,000) 365,000v
Motor vehicles (94,200 + 15,000) 109,200v" v/
20% x (1,060,000-589,000) + (20% x 75,000)
Interest on Bank loan [(7%x3.8m) - 204.8k] 61,200v
2,365,300 729,200 266,000 |
Statement of Allowance for Impairment of Trade Receivables (AFITR)
RM
Bal. b/d 115,000
Less: Bad debt written-off (9,700)
105,300
Less: Decrease in AFITR (SOPL) (17,300)
Bal. c/d 88,000

(16v" x Y2 mark = 8 marks)

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b.
GENIUS BHD
Statement of Changes in Equity for the year ended 31 December 2022
OSC 8% PSC RP ARR

Bal b/d 12,000,000v" | 3,400,000v" | 5,650,000v" | 1,467,200v

Profit for the yearv’ 3,733,800

OCl: Surplus on 1,200,000
revaluation of land
Interim Div: OSC (650,000) v | =_ 786K
. PSC (136,000) v
Final Div: OSC (600,000)v" | _ 236K
. PSC (136,000)v
Balance c/d 12,000,000 3,400,000 7,861,800 2,667,200

Total 15,400,000 10,529,000

(10v" x Y2 mark = 5 marks)

C. GENIUS BHD
Statement of Financial Position as at 31 December 2020
RM RM
Non-Current Assets
PPEv 14,529,400
Investments 6,800,000v
21,329,400
Current Assets
Inventories 609,000v
A/c Receivables (4,372,400 — 9,700 - 88,000) 4,274,700vv
Bank (6,250,500 - 75,000) 6,175,500v
Tax recoverable (1,800,000 - 1,250,000) 550,000v 11,609,200
32,938,600
Finance by
Share Capital } v 15,400,000
Reserves 10,529,000
25,929,000
Non-Current Liabilities
7% Bank Loan 3,800,000v

Current Liabilities
Accrued Director’ fees 85,000v
Accrued Interest on Bank Loan 61,200v
A/c Payable 2,327,400v
Proposed Final Dividend (600,000 + 136,000) 736,000v'v 3,209,600
32,938,600
(14v' x 2 mark = 7 marks)
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CONFIDENTIAL AC/JUL 2023/FAR210

d. Notes to the Account:

i. Property, Plant & Equipment (PPE)

Cost/ Valuation Land Building P&M M/V Total

Balance b/d 6,000,000 | 5,940,000 3,650,000 1,060,000
Revaluation 1,200,000v/
Acquisition 75,000vT
Balance c/d 7,200,000 | 5,940,000 3,650,000 1,135,000 17,825,000
Less:
Accumulated
Depreciation
Balance b/d : 931,600 1,282,000 589,000
Depreciation - 118,800v_4 365,000+~ | 109,200v0f
Balance c/d - | 1,050,400 1,647,000 698,200 3,345,600

Net Carrying Value 7,200,000 | 4,889,600 2,003,000 436,800 14,529,400

v (5v" x 1 mark = 5 marks)

(Total: 25 marks)

QUESTION 2

a. The new building is an item of property, plant and equipment of Terazzo Berhad in accordance
with MFRS116 Property, Plant and Equipment because since it satisfies the definition of
property, plant and equipment:

e The new building has physical substance (tangible item) v/

The new building is held as a marketing and adminisirative office in Rembia
Commercial Hub in order to cater the demand in Melaka (held for administrative
purposes) v’
The new building is expected to be used for 20 years (more than one accounting
period) v’
(3v' x 1 = 3 marks)

The new building satisfies the definition of an asset of Terazzo Berhad because:

The building was acquired on 1 October 2022 (past event) v/

Terazzo Berhad has the right to use the building as a marketing and administrative
office for its business expansion (right)v’
The building is used at the company’s discretion in order to cater the demand in Melaka
(resources controlled by the entity) v
With the new building, Terazzo Bhd will be able to explore new market in Melaka thus
generating more sales for the company (potential to produce economic benefit /
potential of cash inflows) v/
(4v' x 1 = 4 marks)
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c. The new building can be recognised in Terazzo Berhad’s accounting records & financial
statements as an asset since it fulfills the asset’s recognition criteria:

Relevancev” — the new building meets the definition of assetv’ and probable economic
benefits associated with the building will flow to Terazzo Berhadv’

Faithful representationv” — the cost of new building can be measured reliably (certain and
evidenced) v
(5v' x 1 = 5 marks)

d. Calculate the initial cost of the new building.

RM
Purchase price 500,000v
Loan processing cost (legal fees, stamp duty on Sales & Purchase 12,000v
Agreement)
Upgrading the wiring and electrical system 10,000v
Total 522,000
(3v' X 1 = 3 marks)

e. The net carrying value of the new building as at the year ended 31 December 2022.

Year ended Depreciation charged (RM) Net carrying value (RM)

31/12/2021 522 000v'OF x 5%v x 11/12v 522,000 — 23,925 = 498,075
= 23,925

31/12/2022 522,000 x 5%V =26,100 522,000 — (23,925 + 26,100)

= 522,000 - 50,025
= 471,975V

OR

522,000v - (522,000v" x 5%v" x 23/12V)

= 522,000 - 50,025
=471,975v
(5v x 1 = 5 marks)

f. The accounting treatment for all expenses incurred to the lorries in year 2022,

All cost (safety inspection, insurance and road tax renewal, and depreciation) v' incurred
for lorries are regarded as revenue expenditurev’ because they are incurred for the
maintenance of the lorries so as to ensure that the lorries are in good working conditionv”.
Hence, all the cost incurred for the lorries are regarded as operating expensesv” and must
be recorded in Statement of Profit of Loss v for the Year Ended 2022.
(5v' x 1 = 5 marks)
(Total: 25 marks)

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CONFIDENTIAL 6 AC/JUL 2023/FAR210

QUESTION 3

a. The transaction on 1 June 2022 between Treasure Bhd and Earth Bhd give rise to financial
asset v'. The delivery of goods on 1June 2022 to Earth Bhd has created contractual rights
for Treasure Bhd v to receive cash or other financial assets from Earth Bhd v (promise to
pay in 120 days).
(3v' x 1 = 3 marks)

b. The type of receivable that arise on 1 June 2022 is note receivablev'. It is a written promise
made by the preparer (Earth Bhd) to pay the receiver (Treasure Bhd) a specified amount
of money at a definite time/specified date in future. v

(2v' x 1 = 2 marks)

c. MFRS 9 states that an entity shall derecognise a financial asset when and only when:

1. the contractual rights to the cash flows from the financial assets expire v'or
2. it transfers the rights to collect the cash flows (transfer test) and it also transfers
substantially all the risks and rewards of ownership (risk and reward test) of the financial
asset to the transferee.v’

A payment of RM20,000 is received by Treasure Bhd from Bulan Ent. for the amount owing.
However, Bulan Ent. still has an outstanding amount (RM2,000) to be settled to Treasure
Bhd.v" Therefore, the contractual right to the cash flow from the financial asset has not
expired.v" Hence, Treasure Bhd should not derecognised Bulan Ent. from its account
receivable as at 1 October 2022.v
(5v" x 1 = 5 marks)

d. The amount to be disclosed inTreasure Bhd’s Statement of Profit or Loss AND the net
realisable of receivables to be disclosed in the Statement of Financial Position as at 31
December 2022:

Statement of Allowance for Impairment of Trade Receivables

RM
Balance as at 1 January 2022 5,500v
Add: Bad debts recovered 3,000v
L ess: Bad debt written off -
8,500
Less: Reduction during the year (SOPL — Income: Decrease in AFITR) | (2,470) v
Balance as at 31 December 2022 (2,000+1,500+1,650+880) v'v'v'v’ 6,030

Net realisable of receivables to be disclosed in the Statement of Financial Position

RM
Account receivable (100,000+50,000+55,000+22,000) 227,000v
Less: AFITR (6,030) vOF
Balance as at 31 December 2022 (SOFP) 220,970v
(10v" x ¥2 = 5 marks)
(Total: 15 marks)

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CONFIDENTIAL AC/JUL 2023/FAR210

QUESTION 4

a. 2 types of inventories:
e Trading inventoriesv’
e Raw materialsv’
e Work-in-progressv’
e Finished goodsv’
(any 2v° x 1 =2 marks)

b. The embroidery bed sheets are inventoryv’ of Comfort Bhd because it is trading
inventories held for resale in the ordinary course of business as the company is a
wholesaler of bedding items in Melaka. v’

(2v' x 1 mark = 2 marks)

c. The value of the unsold embroidery bed sheets as at 31 December 2022:

Embroidery | Unit | Cost NRV Closing Write-

bed sheets inventories | down
value
Good 180 fJFr%]li\t/IS16,OOO/500 units) x 180 (RM100 - RM15) x 180 units RM5,760 :
= v itsv’
= RM32v" x 180 unitsv’ ~ SM?g 38(01 80 units
= RM5,760 B ’
Defect 20 | (RM16,000/500 units) x 20 | [[RM100 x 70%) - (RM15 + RM640 -
units RM10)] x 20 units
= RM32v" x 20 unitsv’ = [RM70v" - RM25v'v'] x 20
= RM640 unitsv’
= RM45 x 20 units
= RM900
200 RM6,400 -

MFRS 102 requires that inventories shall be measured at the lower of cost and net
realizable value v'.

Hence the good embroidery bed sheets will be valued at cost of RM5,760, and the defect
embroidery bed sheets will also be valued at cost of RM640. Thus, the amount to be
disclosed in SOFP is RM6,400v of.

(12v" x % = 6 marks)
(Total: 10 marks)

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CONFIDENTIAL 8 AC/JUL 2023/FAR210

QUESTION 5

Idaman Bhd
Cash Flow Statement for year ended 31 December 2022v
RM RM
Cash from operating activities v’
Cash receipts from customers (w1) 24,818,500 v v v
Cash paid to suppliers (w2) (12,767,000) vvvvvv
Cash paid for other expenses (w3) (2,365,000) vvvvv

Cash generated from operations 9686,500

Interest paid (150,000) v
Tax paid (w4) (2,293,200 v v v
Net cash flow from operating activities
7.243 300
Cash flows from investing activities v
Purchase of PPE (w5) (3,830,000) v v v v
Proceeds from disposal of PPE ( w6) 328,000 v v
Purchase of Investment (500,000) v v
(6,200,000 — 5,700,000)
Dividend received on investment 32,000 v
Net cash flow from investing activities (3,970,000)

Cash flows from financing activities v/

Proceeds from long term loan 1,558,000 v v
(2,788,000 — 1,230,000)
Dividends paid (w7) (1,913,800) vvv v
Net cash flow from financing activities (355.800)
Net increase in cash and cash equivalents v 2.917,500

Cash and cash equivalents at the beginning

of the period (2700,000 + 503,000) 3.003.000 ¥
Cash and cash equivalents at the end of the 6,120,500 v
period (6,000,500 + 120,000)
( 40V x %2 mark = 20 marks)

W1

Trade Receivable
Bal. b/d 850,000v" | Bank/cash 24,818,500
Turnover 24.000,000v" | Bal. c/d 31,500v
24,850,000 24,850,000

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CONFIDENTIAL 9 AC/JUL 2023/FAR210

W2
Trade Payable
Bank/cash 12,767,000 | Bal. b/d 965,000v
Bal. c/d 200,000v" | Purchases (w3) 12,002,000v
12,967,000 12,967,000

Inventories
Bal b/d 78,000v" | COGS 12,030,000v
Purchases (w3) 12,002,000 | Bal c/d 50,000v
12,080,000 12,080,000

W3
Administrative expenses
Depreciation 50,000v" | Accrued b/d 20,000v
Accrued c/d 5,000v" | SOPL 2.000,000v
Bank/cash 1,965,000
2,020,000 2,020,000

Total payment for other expenses = S&D 400,000v'+ Adm 1,965,000 = 2,365,000
W4
Taxation
Bank 2,293,200 | Bal b/d 26,000v
Balance c/d 8,000v" | SOPL 2275,200v
2,301,200 2,301,200

W5
Property, plant & equipment
Bal b/d 4,790,000v" | Disposal 300,000v
Depreciation 50,000v
Bank/cash 3,830,000 | Bal c/d 8,270,000v
8,620,000 8,620,000

W6
Disposal — office.equipment
Office equipment 300,000V
SOPL: Gain on disposal 28,000v" | Bank/cash 328,000
328,000 328,000

W7
Retained profit
Bonus/OSC 3,690,000v" | Bal b/d 4,000,000v
Dividend 1,913,800 | PAT 7,204,800V
Bal c/d 5,601,000v
11,204,800 11,204,800

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b. Five transactions that can be classified under cash flow from investing activities in the
statement of cash flow.

Cash receipts from the sale of property plant and equipment.v’

Received investment incomev’
OOk~

Received dividend incomev’

Bought property, plant and equipment by cash.v’
Sale of investmentv’
Purchased investment by cashv’

® Or other acceptable answers

(Any 5 points x 1 mark = 5 marks)
(Total 25 marks)

END OF SUGGESTED SOLUTIONS

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