6.CT FAR270 Q NOV2017 epic common test PDF

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AC/NOV 2017/FAR270

UNIVERSITI TEKNOLOGI MARA COMMON TEST

COURSE

:

FINANCIAL ACCOUNTING 4

COURSE CODE

:

FAR270

TIME

:

1 HOUR 30 MINUTES

DATE

:

17 NOVEMBER 2017

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of three (3) 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) ii)

the Question Paper an Answer Booklet – provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 4 printed pages

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AC/NOV 2017/FAR270

QUESTION 1 A.

Patin Bhd is a diversified company that operates its business in Kuantan, Pahang. During the financial year ended 31 March 2017, Patin Bhd has recorded the following transactions: i.

The company rents out its office building to Perniagaan Baru and earns monthly rental of RM2,500.

ii.

Owns a 1.5 acres land in a sub-urban area near Kuantan. The land is leased out to Amin Agro for monthly rental of RM8,000 under operating lease agreement.

iii.

Acquired a building for RM560,000. Until 31 March 2017, the company has yet to determine whether to use the building as business office or rent it to the third party or to be sold out immediately.

iv.

Owns a 10-storey building in the Kuantan town area. Patin Bhd uses this building to operate a hotel chain branded as Leaf Hotel.

Required:

B.

a.

Define investment property in accordance with MFRS 140 Investment Property. (2 marks)

b.

State whether the above properties can be classified as investment property or not according to MFRS 140 Investment Property. (4 marks)

On 1 September 2016, Maju Bhd acquired a 15-storey building for RM2 million (excluding trade discount of 2%). Out of 15 storeys, only top floor is occupied as the management office and the remaining floors are rented to the third parties. Acquisition price was for the whole of the building and each level of the building cannot be bought or sold separately. Maju Bhd also incurred the following costs on acquisition: Items Legal costs and stamp duty Annual property tax Property launching expenses

RM 200,000 12,000 30,000

It was estimated that the fair value of the property as at 31 March 2017 was RM3 million. The economic useful life of the property was determined to be 40 years. Maju Bhd adopts fair value model to measure the investment property. Required: a.

Calculate the initial cost of the investment property for Maju Bhd (3 marks)

b.

Discuss the accounting treatment for the year ended 31 March 2017 for Maju Bhd in accordance to MFRS140 Investment Property. (4 marks)

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c.

3

AC/NOV 2017/FAR270

Prepare the necessary journal entry to recognise change in the fair value on 31 March 2017 if the fair value on that date was determined to be RM2.05 million. (2 marks) (Total: 15 marks)

QUESTION 2 A.

Eat n Eat Sdn Bhd is a local company based in Alor Setar, Kedah. On 1 February 2016, Eat n Eat Sdn Bhd signed an agreement to operate as a franchisee of a wellknown fast food outlet for an initial franchise fee of RM500,000. The franchise agreement is for a period of 5 years. In March 2016, before the new fast food outlet was opened, the company hired and trained new sales staff at a cost of RM220,000. It was expected that the benefits derived from the training could last for 2 years. The company’s financial year ends on 31 December each year. The company uses cost model for its intangible assets. Required:

B.

a.

According to MFRS138 Intangible Assets, the key criteria in the recognition of an intangible asset are identifiability, controlled over a resource and existence of future economic benefits. Describe the criteria for controlled over a resource in the context of intangible asset. (2 marks)

b.

Briefly explain whether the franchise fee and pre-opening staff training cost above are items of intangible asset according to MFRS138 Intangible Assets. (2 marks)

c.

Discuss the accounting treatment for the franchise fee and pre-opening staff training cost in the financial statements of Eat n Eat Sdn Bhd for the year ended 31 December 2016 in accordance with MFRS138 Intangible Assets. (3 marks)

Seri Bhd started developing its own clothing brand “Wow”. The expenditure incurred during the year ended 30 September 2017 were as follows: Types of expenditure Research as to the extent of the market Prototype clothing and good design Rental of special equipment in the development process Development work undertaken to finalise product design Production and launch of products

RM 70,000 100,000 60,000 120,000 50,000

Required: a.

Determine the cost of development that can be capitalised as intangible assets according to MFRS 138 Intangible Asset. (2 marks)

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AC/NOV 2017/FAR270

b.

List any FOUR (4) capitalisation criteria for an intangible asset arising from development in accordance with MFRS138 Intangible Assets. (4 marks)

c.

State when an intangible asset should be derecognised. (2 marks) (Total: 15 marks)

QUESTION 3 Given below are FIVE (5) independent situations for the year ended 31 December 2016. i.

On 6 December 2016, Raya Auto Bhd, a second hand car dealer sold a car to Mr. Ganesh for RM32,000. Mr. Ganesh paid a down payment of RM12,000 and the balance is to be paid in 10 monthly instalments. Mr. Ganesh took immediate delivery of the car.

ii.

Deskdeco Bhd entered into a contract agreement with Shida Enterprise on office renovation in July 2016. The total contract revenue was RM120,000. As at 31 December 2016, Deskdeco Bhd has incurred 55% of the total contract cost of RM60,000.

iii.

In December 2016, Koko Bhd received an order of furniture costing RM65,000. Since the furniture was not in stock, Koko Bhd can only made delivery in February 2017. The customer has paid a deposit of RM20,000 and the balance will be paid when the furniture is delivered.

iv.

D’newsDaily supplies magazines to Fast Link Bhd starting from June 2016. Fast Link Bhd made a payment to the company amounting to RM4,000 for eight months subscription.

v.

On 1 November 2016, Alif Bhd bought 10% debentures with a nominal value of RM3,000,000 from Gagasan Bhd. Interest of RM150,000 was received by Alif Bhd on 15 May 2017.

Required: Explain the basis and timing of revenue recognition in the financial statements for the year ended 31 December 2016 (include the amount of revenue to be recognised, if any) for each of the above situations in accordance with MFRS118 Revenue. (Total: 10 marks)

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