CONFIDENTIAL AC/JAN 2024/FAR410

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : FINANCIAL ACCOUNTING AND REPORTING 1

COURSE CODE : FAR410
EXAMINATION : JANUARY 2024
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 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 2 AC/JAN 2024/FAR410

QUESTION 1

CyberTech Bhd manufactures and sells computer parts for the local market. The company is
currently preparing its final draft of financial statements for the year ended 31 December 2023.
Provided below is the trial balance as at 31 December 2023:

Accounts RM RM
Sales 22,080,000
Cost of sales 8,635,200
Inventories 742,800
Administrative expenses 916,800
Selling and distribution expenses 624,000
Audit fees 108,000
Directors' remuneration 771,000
Tax paid 3,120,000
Freehold land (cost) 7,200,000
Building (cost) 7,128,000
Plant and machinery (cost) 4,380,000
Motor vehicles (cost) 1,152,000
Accumulated depreciation as at 1 January 2023:
Building 997,920
Plant and machinery 338,400
Motor vehicles 226,800
Investment 8,160,000
Interim ordinary dividend 703,200
Retained earnings as at 1 January 2023 7,340,640
Ordinary shares ' 22,080,000
6% Bank loan 2,160,000
7% Debentures 700,000
| Investment income 759,600
Interest on bank loan 125,760
Interest on debentures 24,500
Cash at bank 9,376,100
Accounts receivable and payable 4,046,880 392,880
Allowance for impairment of trade receivable 138,000
57,214,240 57,214,240

Additional information:

1. On 12 June 2023, inventory costing RM500,000 was found obsolete and could only be
sold for RM100,000. : '

2. The following information relates to the non-current assets of the company:

i. The company acquired a building on 1 August 2023. The purchase price of the
building was RM2,200,000. Other costs incurred in association with the purchase
was legal fees of RM80,000 and attributable costs paid to government agencies
amounted to RM20,000.

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_ii. ~ On 11 November 2023, the company purchased a new motor vehicle costing
RM170,000 by cheque and the transaction was not yet recorded in the books.

iii. Freehold land was revalued to RM8,500,000 on 30 September 2023. The directors
agreed to incorporate this value into the financial statement.

iv. On 1 November 2023, one of the machines costing RM300,000 was disposed at
RM110,000. The accumulated depreciation of the disposed machine on the date
was RM210,000. This transaction has yet to be recorded.

v. ltisthe company’s policy to depreciate its property, plant and equipment on a yearly
basis at the following rates:

Buildings 2% per annum on cost

Plant and Machinery 10% per annum on cost
Motor vehicles 20% per annum on carrying value

Depreciation on motor vehicles is to be classified as selling and distribution

expenses.

3. Directors’ remuneration of RM90,000, part of the interest on loan and debenture interest
were still accrued.

4. On 25 December 2023, the company issued additional 2,000,000 ordinary shares at

RM1.20 each. All shares were fully subscribed and paid for. This transaction has yet to
be recorded in the financial statement for the year ended 31 December 2023.

5. RM500,000 of the 7% Debentures were redeemed on 27 November 2023.

6. One of the customers who owed the company RM200,000 was declared bankrupt on 1
October 2023. The customer managed to settle only half of the total amount. After
analysing the credit risk of trade receivables, the management decided that allowance
for impairment of trade receivables at the end of the accounting period should be
allocated at RM380,000. No records had been made.

7. On 10 December 2023, the company declared a final dividend on ordinary shares of

RM1,104,000.

8. The tax expense for the year was estimated to be RM2,900,000.

Required:

Prepare the following financial statements in a form suitable for publication in accordance with
the Companies Act 2016 and MFRS 101 Presentation of Financial Statements and other
relevant Malaysian Financial Reporting Standards:

a. Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2023.
(12 marks)

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b. Statement of Changes in Equity for the year ended 31 December 2023.

(4 marks)

c. Statement of Financial Position as at 31 December 2023.

(8 marks)

d. Notes on property, plant and equipment.

(6 marks)
(Total: 30 marks)

QUESTION 2

On 1 July 2022, Beta Berhad purchased a new motor vehicle to be used in the business. The
motor vehicle has greatly improved the delivery operation of the company. It is the policy of of
Beta Berhad to depreciate its motor vehicle over 10 years based on straight-line method on a
monthly basis. The company closed its account on 31 December of each year.

Details on the motor vehicle was as follows:

RM
Selling price 600,000
Custom duties ' 2,250
Transportation costs 6,200
Insurance on purchase 1,770
Documentation on purchase 250
Printingof the company’s name and logo 750
Fuel 2.150
Maintenance & service cost 1,650

Required:

a. Define property, plant and equipment in accordance with MFRS 116 Property, Plant and
Equipment. ‘
(4 marks)

b. Identify whether the motor vehicle can be classified as an item of property, plant and
equipment in accordance with MFRS 116 Property, Plant and Equipment.
(3 marks)

c. Calculate the initial cost of the motor vehicle as at 1 July 2022.

(3 marks)

d. Calculate depreciation expense of the motor vehicle for the year ended 31 December
2022. ‘
(3 marks)

e. Prepare an extract of the Statement of Profit or loss for the year ended 31 December
2022.
(3 marks)

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 CONFIDENTIAL AC/JAN 2024/FAR410

f. On 1 January 2019, Didi Berhad acquired a piece of land and a machine for
RM2,000,000 and RM500,000 respectively. The estimated useful life of the machine is
10 years with no residual value. The company adopted the revaluation model for all its
property, plant and equipment. It is the policy of the company to charge full depreciation
in the year of acquisition and none in the year of disposal. Revaluation is to be done in
the year ended 2020 when the fair value of the land and machine were RM2,300,000
and RM450,000 respectively.

Required:

i. Discuss the accounting treatment on the machine for the year ended 31 December
2020.
(6 marks)
ii. Prepare the relevant journal entries on the revaluation of the land forthe year ended
31 December 2020.
(3 marks)
(Total: 25 marks)

QUESTION 3

Tyres Solution Sdn Bhd is a company that provides services and sells various types of tyres
for all types of passenger vehicles only. As of 31 December 2023, the unsold tyres left in the
workshop were as follows.

Tyre brand Quantity | Cost Net Realisable Value (NRV)

(RM) (RM)
1. | Michelin
Michelin Pilot Sport 5 15 380 450
Michelin XM2+ 10 180 220
2. | Continental
Ultra Contact UC7 13 200 245
Max Contact MC6 8 400 371
3. |Goodyear
Assurance TrilpleMax 2 10 378 405
‘Assurance MaxGuard SUV 9 495 549
4. |Pirelli Cinturato Rosso 6 230 215
5. |Hankook Kinergy Eco2 6 143 150

The company closes their accounts on 31 December every year.

Required:

a. Explain whether the tyres can be classified as an inventory as per MFRS 102 /nventories.
(4 marks)

b. Calculate the value of unsold tyres as at 31 December 2023 on an item-by-item basis in

accordance with MFRS 102. Clearly show the value of closing inventory and any written
down (if any).
(5 marks)

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c. Assuming, during the year ended 31 December 2023, there were 12 units of Michelin
XM2+ tyres recorded at total cost RM6,600 was given to the customers for a lucky draw
contest as part of the promotion purposes.

Explain the accounting treatment for the given scenarios in accordance with MFRS102
including the relevant journal entries.
(3 marks)
(Total: 12 marks)

QUESTION 4

A. MFRS 15 Revenue from Contracts with Customers specifies how and when to recognise
revenue as well as requires such entities to provide users of financial statements with
more informative and relevant disclosures. The standard provides a single, principles-
based five-step model to be applied to all contracts with customers.

Required:

i. Briefly explain the objective of allocating transaction price.

(2 marks)

ii. ldentify TWO (2) factors that indicate the promise to transfer the goods or services
which are not separately identifiable.
(2 marks)

B. Jendela Tirai Bhd was entrusted with an order by Cossy Curtain Sdn Bhd to transport a
significant quantity of ready-made curtains on 1 October 2023, with a total value of
RM40,000. Jendela Tirai Bhd adheres to a policy that necessitates the purchaser make
a 50% payment for orders less than RM50,000 at the time of placing the order, and the
remaining amount will be settled in full upon delivery. Therefore, Cossy Curtain Sdn Bhd
immediately processed the half payment, which amounted to RM20,000, to Jendela Tirai
Bhd on the day the order was placed. The delivery of the ready-made curtain to Cossy
Curtain was successfully completed on 2 December 2023 together with the settlement
of the outstanding balance.

Required:

Based on MFRS 15 Revenue from Contracts with Customers, advise Jendela Tirai Bhd
on how to recognise the revenue and support your answer by showing relevant journal
entries.
(5 marks)

C. My Cutey Beibeey Bhd came up with an insightful “Baby Cute Package’ for their
consumers to boost sales during the Chinese New Year. The package is priced at
RM3,999. The stand-alone prices are as follows.
' RM
. Baby Cot 2,300
a Baby Stroller 1,600
) Baby Car Seat 400
o Free Baby Bouncer 99

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Mrs. Wong browsing the promotion online and decided to take up the ‘Baby Cute
Package’. She has made a payment of RM3,999 using online transfer banking.

Required:

Based on five (5) steps model in revenue recognition as required by MFRS15 Revenue
from Contract with Customers, allocate the transaction price to separate performance
obligation. Show all necessary calculations.
(3 marks)
(Total: 12 marks)

QUESTION 5

The Statement of Profit or Loss for the year ended 31 December 2022 and the Statement of
Financial Position as at 31 December 2021 and 2022 of Pluto Bhd are as follows:

PLUTO BERHAD
Statement of Profit or Loss for the year ended 31 December 2022
RM’000
Revenue 37,300
Cost of sales (12,500)
Gross profit 24,800
Administrative and distribution expenses (5,200)
Finance cost (2,350)
Profit before tax 17,250
Taxation (4,000)
Profit for the year 13,250

PLUTO BERHAD
Statement of Financial Position as at 31 December 2022

2022 2021
RM’000 RM’000
Non-current Assets
Property, Plant and Equipment 29,400 28,300
Investment 14,300 12,200

Current Assets
Inventories 13,800 11,900
Trade Receivables 12,600 12,700
Tax Recoverable 2,000 -
Cash at Bank 13,600 11,500
85,700 76,600
Financed by:
Owner’s Equity
Ordinary Shares 22,800 20,900
Preference Shares 9,300 8,900
Revaluation Reserves 500 -
Retained Earnings 24,900 17,400
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Non-current Liabilities
5% Debentures 6,200 7,100

Current Liabilities
Tax Payable - 2,050
Interest Payable 9,950 8,950
Trade Payable 8,750 8,200
Bank Overdraft 3,300 3,100
85,700 76,600

Additional information:

The increase in property, plant and equipment was partly due to a small piece of land
" acquired by cash.

2. During the year, a piece of equipment with a carrying value of RM630,000 was disposed
at a loss of RM30,300.

3. Included in the administrative and distribution expenses was depreciation charged for
depreciable property, plant and equipment RM 1,700,000.

4. An investment valued at RM2,500,000 was sold for a loss of RM80,500.

5. Retained earnings were utilized to issue RM1,550,000 bonus shares to the existing
shareholders.

6. An interim dividend was declared and paid during the year.

Required:

Prepare the Statement of Cash Flow for Pluto Bhd for the year ended 31 December 2022
using the indirect method in accordance with MFRS 107 Statement of Cash Flows.

(Total: 21 marks)

END OF QUESTION PAPER

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