FAR 210 PAST YEAR PAPER December 2018 PDF

Preview

Summary

UNIVERSITI TEKNOLOGI MARAFINAL EXAMINATIONCOURSECOURSE CODEEXAMINATIONTIMEFINANCIAL ACCOUNTING 3FAR 210DECEMBER 20183 HOURSINSTRUCTIONS TO CANDIDATES This question paper consists of five (5) questions. Answer ALL questions in the Answer Booklet. Start each answer on a new page. Do not bring any mate...

Description

ACIDEC 2018/FAR210

CONFIDENTIAL

UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION

COURSE COURSE CODE EXAMINATION TIME

FINANCIAL ACCOUNTING 3 FAR 210 DECEMBER 2018 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 an Answer Booklet — provided by the Faculty

5.

Answer ALL questions in English.

O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL 2 ACIDEC 2018/FAR210 DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 7 printed pages

QUESTION 1 The following is the trial balance extracted from the accounting books of Motion Lifestyle Bhd for the year ended 30 June 2018:

Debit

Credit

Cost of sales and Sales Investment Director fees

45,00 0

Audit fees

7,500

Rental

240,00 0

Interest on debentures

196,00 0

Dividend received

560,00 0

Commission aid to salesmen

48,50 0 350,00 0

Staff salaries Bank Inventories at cost

681,00 0

Freehold land Motor vehicles at cost

122,50 0

Machine at cost Accumulated depreciation as at 1 Jul

320,00 0 2017: 56,00 0 196,00 0 132,00 0

Motor vehicles Machine

Accounts receivable and a able

Tax aid Hak Cipta Universiti Teknologi MARA

186,00 CONFIDENTIAL

CONFIDENTIAL

ACIDEC 2018/FAR210

3

0 7% Debentures

Ordinary shares Allowance for impairment of trade receivables as at 1 July 2017

2,500

Retained profits Interim dividend — ordinary shares

125,00 0 61

Additional information: The following items have not yet been adjusted in the company's books: 1.

On 28 May 2018, the company acquired a motor vehicle worth RM90,000 and paid by cheque. The following is the depreciation policy of the company: Motor vehicles- 10% per annum using straight line method based on monthly basis. Machinery - 15% per annum using reducing balance method on yearly basis. (The depreciation on motor vehicles is to be treated as selling and distribution expenses).

2.

Inventories checking had found that 30% of the year end inventories can only be sold at RMI 50,000.

@

3.

The freehold land was revalued to

4.

Half year interest on debenture is still outstanding and commission paid to salesmen was overpaid by RMI ,500.

5.

One of the accounts receivable owing RM2,000 is to be written off and the allowance for impairment of trade receivables to be adjusted to 1% of the accounts receivable balance as at year end.

6.

Motion Lifestyle Bhd has 20,000,000 fully paid ordinary shares. The board of directors decided to declare 2 units of bonus shares for every 1,000 units of ordinary shares and retained profits is to be used for this purpose.

7.

The company also proposed 5% of final dividend for ordinary shares held at the beginning of the accounting year.

8.

Tax expenses for the year is estimated at RMI 50,000.

Required:

O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL 4 ACIDEC 2018/FAR210 a. 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 30 June 2018.

(8 marks) ii.

Statement of Changes in Equity for the year ended 30 June 2018.

(5 marks) Statement of Financial Position as at 30 June 2018.

(9 marks) b.

Prepare Notes to the accounts on Property, Plant and Equipment.

(8 marks) (Total: 30 marks)

QUESTION 2 MCB Bhd is an established manufacturer of ceramic tiles and bathroom accessories. The company decided to build a new factory catering to the increased demand of its accessories products. The construction started on 1 January 2016 and was completed on 31 December 2016. The new factory is expected to be used for 20 years. The costs incurred for the construction of the new factory building are as follows: 1 . The contractor's cost incurred by MCB Bhd amounting to The direct material cost is RM850,000 and the cost of material wastage is worth RM70,000. The cost of labour used in construction is RM450,000.

Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL 2.

Other incurred:

5

costs

Engineer's cost Interest cost incurred to finance the construction General administrative overhead allocated

3.

ACIDEC 2018/FAR210

95,0 00

105,0 00 60,0 00

In addition, the company also incurred architect fees at 10% of the contractor's cost. (2 000 000)

The company decided to provide the depreciation on the factory building at 10% per annum on cost based on a yearly basis. MCB Bhd closes its books on 31 December each year.

Required: a.

i. Describe whether the newly constructed factory building satisfies the definition of an asset. The new constructed factory building fits the definition of an asset because:

O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

6

ACIDEC 2018/FAR210

1. It is physical resource controlled by entity (MCB Bhd) since it is used at the company discretion to manufacture ceramic tiles and bathroom accessories. 2. The factory building had been constructed since 1 January 2016 (past events) by MCB Bhd before using it for its business. 3. It will result in cash inflow to company since the new factory will allow more production of ceramic tiles and bathroom accessories to be sold to customers (future Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

7

ACIDEC 2018/FAR210

economic benefits)

(3 marks) ii.

Explain briefly whether the new factory building is an item of property, plant and equipment in accordance with MFRS 1 16 Property, Plant and Equipment.

The factory building is an item of Property, Plant and Equipment because: 1. The factory building has physical form of tangible assets. 2. The factory building is held for use in the production of company’s products i.e. ceramic tiles and bathroom accessories. O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

8

ACIDEC 2018/FAR210

3. The factory building is expected to be use more than 1 year as it has useful life of 15 years. (4 marks)

b.

Discuss briefly the criteria for the new factory building to be recognised as an asset in the MCB Bhd's Statement of Financial Position.

b. The factory building can be recognised in company’s SOFP as it fulfils the recognition criteria of asset: • It is probable that future economic benefits associated with the factory building will flow to the entity (i.e. company enjoy the rewards (increase in revenue) and bear the risk). Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL •

9

ACIDEC 2018/FAR210

The cost of the factory building can be measured reliably (based on their initial cost).

(2 marks) c.

Explain the depreciable amount of an item of property, plant and equipment. Depreciable amount of an item of PPE is its cost or other substitute amount less the estimated residual value or salvage value

(2 marks) d.

Explain the components of initial cost of the new factory building. Initial cost of the new factory building consists of: 1. All costs that relate specifically O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

10

ACIDEC 2018/FAR210

to the construction of the building (direct materials less wastage, labour, contractor’s costs). 2. Costs that can directly incurred to the construction of building e.g. engineering fee, architect fee and cost of borrowings taken to finance the construction of the building. 3. General administrativ e overhead is excluded from the computation of initial cost of building.

(3 marks) ii.

Calculate the initial cost of the

Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

ii.

ACIDEC 2018/FAR210

11

new factory building. Initial cost of factory building: Constructor’s cost Architect’s fees (10% × 2,000,000) Direct materials (net: 850,000 – 70,000) Labour used in construction Engineer’s cost Interest cost to finance construction Total initial cost

RM 2,000,000 200,000 780,000 450,000 95,000 105,000 3,630,000

(3 marks) Calculate the depreciation expenses of the new factory building for the year ended 30 June 2018. Depreciation expenses as at 30 June 2018: Depreciation = RM3,630,00 0 of x 10% x 6/12 (months: 1jan-30 june) = RM181,500

(3 marks) O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

12

ACIDEC 2018/FAR210

On 1 January 2018, MCB Bhd revalued (sales proceed) its administrative building to rm9400,000. The cost of the administrative building was Rm12,000,000 and the accumulated depreciation on revaluation date was RM 2,400,000 Discuss the revaluation principles for items of property, plant and equipment. Revaluation principles 1. Reval uation shall be performe d regularly. 2. For item of property, plant, and equipme nt that experienc e significa nt and volatile changes in fair value may necessitat e annual Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

13

ACIDEC 2018/FAR210

revaluati on. 3. Whe n an item of property, plant and equipme nt to which the asset belong shall be revalued. 4. The fair value of land and building is determin ed from marketbased evidence by appraisal undertak en by professio nally qualified valuers. If there is no market-based evidence of fair value, an entity may need to estimate fair value using an income or a depreciated replacement cost approach.

(5 marks)

O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL ii.

14

ACIDEC 2018/FAR210

Advise the company on the accounting treatment for the revaluation of the administrativ e building.

A c c o u n t i n g t r e a t m e n t 1. Elimi nate the accumula ted depreciat ion of 2,400,00 0 from it cost, RM12,00 0,000. Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

15

ACIDEC 2018/FAR210

2. Henc e, the carrying amount of RM9,600 ,000 is derecogn ised from the Statemen t of Financial Position. 3. The deficit on revaluati on of RM200,0 00 is recognise d as expense in Statemen t of Profit or Loss. 4. The revalued amount of RM9,400 ,000 is recognise d in company ’s Statemen t of Financial Position (deemed O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

ACIDEC 2018/FAR210

16

to be carrying value as at 1 January 2018.

WORKINGS: Sales proceed Less: Carrying value Cost (-) Acc depreciation: Carrying value Loss on disposal / deficit

RM

RM 9,400,000

12,000,000 2,400,000 9,600,000 (200,000)

(5 marks) (Total: 30 marks)

QUESTION 3 Syarikat JR is an established books distributor located in Sungai Buloh, Selangor. The sale transactions are commonly made on credit and the company offers discounts to its customers for a large amount of purchase and prompt payment by customers. Below are the credit sales transactions related to its customer, Syarikat Aman Sdn Bhd:

Date

Transactions

Amount

25 April 2018

Syarikat Aman Sdn Bhd ordered 150 religious books through telephone and a purchase order was faxed on the same date

RM3,150

Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL 28 April 2018

17

ACIDEC 2018/FAR210

Sent books ordered by Syarikat Aman Sdn Bhd. The invoice stated the credit term of 15/7 net 30. The books were received on the same day and the transportation cost of RM200 was paid by cash by Syarikat Aman Sdn Bhd u on delivery

10 May 2018

Entitle to trade discount

Syarikat Aman Sdn Bhd paid amount due by issuing cheque amounted to RM2,000.

Required:

a.

List THREE (3) factors that affect the amount receivables in a company. Volume of 1. sales 2. Company policy on proportion of cash to credit sales 3. Industry 4. Credit policy (loose or tight policy) 5. Types and nature of business

(3 marks)

b.

Discuss briefly when Syarikat Aman Sdn Bhd may be recognised in company's book.

-

Syarikat Aman Sdn Bhd is recognised in a company’s book as at 28 April 2018, upon delivery of goods to the company. The delivery of good to Syarikat Aman has created contractual

O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

18

ACIDEC 2018/FAR210

rights for Syarikat JR to receive cash or other financial assets from Syarikat Aman Sdn Bhd.

(2 marks)

c.

Explain whether Syarikat JR should derecognise Syarikat Aman Sdn Bhd from company's book as at 10 May 2018. To derecognize a financial asset, MFRS 139 states that an entity shall derecognize a financial asset when and only when: 1. The contractual rights to the cash flows from the financial assets expire 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. On 10 May 2018, a payment of RM2,000 is received from

Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

19

ACIDEC 2018/FAR210

Syarikat Aman Sdn Bhd to pay for the amount owe. However, it does not fully pay the whole amount owing amounted to RM2,520. The contractual right to the cash flow from the financial asset has not expired. Hence, Syarikat JR shall not derecognized Syarikat Aman Sdn Bhd from its books as at 10 May 2018.

(5 marks)

d.

The Statement of Financial Position of Syarikat JR as at 1 July 2017 shows the following:

Trade receivables Less: Allowance for impairment of trade receivables

Net realisable of receivables

60,000 2,000

58,000

During the year, the total net credit sales was RM85,500 and the cash received from customers for the year was RM77,500. The company did not recognise a bad debt (to be written off) of RMI ,400 incurred during the year due to omission error. It O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

ACIDEC 2018/FAR210

20

is the practice of the company to estimate 3% of the credit sales as uncollectibles. Construct Statement of Allowance for impairment of trade receivables and trade receivables account.

-

Statement of Allowance for impairment of trade receivables as at 31 December 2018.

RM Balance as at 1 July 2017. (ambik dari AFITR) Written off (bad debts) Charge for the year (SOPL) (85,500 x 3%) Balance as at 30 June 2018

2,000 (1,400) 2,565 3,165

**Estimate 3% of credit sales as uncollectible Allowance for impairment of trade receivables (AFITR) account Dr (RM) Balance b/d A/c receivable (bad debt w/off) SOPL – increase (85,500 x 3%) Bal c/d (balancing figure)

Hak Cipta Universiti Teknologi MARA

Cr (RM) 2,000

1,400 2,565 3,165 4,565

4,565

CONFIDENTIAL

CONFIDENTIAL

ACIDEC 2018/FAR210

21

Trade receivables account Dr + (RM) Balance b/d -ambil dari trade receivable Sales - credit Bank (cash received from customers) Bad debts written off

Cr (RM)

Balance (RM) 60,000 145,500 68,000 66,600

85,500 77,500 1,400

(5 marks) (Total: 15 marks)

QUESTION 4 Suci Ayu Bhd is a wholesaler of health-care products. The following are data pertaining to health supplement of the company for the year ended 30 June 2018:

Type of Health Su lement Liquid Tablet

Purchased during the ear

Sold during the ear

1,700 bottles

1 ,200 bottles

2,500 boxes

2,200 boxes

Cost

Net

Realisable Value RM150 er bottle

RM50 per box

RM155 per bottle RM80 per box

Total import dut

Total handling cost

RM2,OOO

RM1,275

RMI ,250

RM625

Required:

O Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

a.

22

ACIDEC 2018/FAR210

Define the term inventory in accordance with MFRS 102 Inventory. -

MFRS 102 Inventories defines Inventory as asset

1. Held for sale in the ordinary course of business; 2. In the process of production for such sale; 3. In the form of materials and supplies to be consumed in the production process or in the rendering of services.

(3 marks)

b.

In most circumstances the item-by-item basis would be appropriate in writing down value of inventories to net realisable value. However, there are circumstances in which the item-byitem basis would be less appropriate. List these circumstances. -

Circumstances in which item-byitem basis is less appropriate to be used in NRV test (group of similar

Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

ACIDEC 2018/FAR210

23

items more appropriate) are when the items of the inventory relate to: 1. Same product line, 2. Have similar purpose and use and 3. Are produce and marketed in the same geographical area. (Page 262)

-

(3 marks)

c.

Determine the value of the inventory as at 30 June 2018 on item-by-item basis in accordance with MFRS 102 Inventories. -

Value of inventory on item-by-item basis

Liquid

Unsold quality 500

Cost (RM) (500 × 150) + 2,000/1700 X 500 + 1,275/1700 X500 = 75,963.24

O Hak Cipta Universiti Teknologi MARA

Net Realisable Value (RM) 500 × 155 = 77,500

Value of Inventory (RM) 75,963.24

CONFIDE...