Test FAR570 Feb2021 PDF

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Answer scheme QUESTION 1 The date of the assumption of the conversion are on the 1 / January / 201 9 and on the 1 / April / 2019. The assumption of the date is important because it affects the calculation of the weighted average number of shares used in the computation of the diluted earnings per sh...

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Answer scheme QUESTION 1 1. The date of the assumption of the conversion are on the 1 / January / 2019 and on the 1 / April / 2019. The assumption of the date is important because it affects the calculation of the weighted average number of shares used in the computation of the diluted earnings per share. / (5 x 1 = 5 marks) 2. BEPS (2018) = 800,000 √ / 6,000,000* = RM0.1333 BEPS (2019) = 600,000 √/ (7,000,000 + 300,000*) = RM0.08219

Jan 2018

b/d

5,000,000√x6/12√

WANOS 2,500,000

July 2018 - Dec 2018

New issue

2,000,000 7,000,000√ x 6/12√

3,500,000

7,000,000

6,000,000

Jan 2019 -Dec 2019

b/d Conversion (1m x 100/RM100) √ x 30%√

7,000,000 300,000

7,300,000 x 12/12 7,300,000

7,300,000 7,300,000 (8 x ½ = 4 marks)

3. DEPS 1. BEPS(2019)

Workings 600,000/7,300,000

RM 0.08219

5% x RM1,000,000 x 70% x 76% = RM26,600 /// 1,000,000 x 100 / RM100 x 70% = 700,000 ordinary shares /// RM26,600/700,000

RM0.038

2. Compute the incremental EPS: 5% convertible debenture Increase in earnings: Increase in WANOS -assumed conversion: Incremental EPS Warrants Increase in earnings: Increase in WANOS -assumed conversion :

Nil / 200,000 – [200,000 x 4/5] 9/12(April-Dec)=30,000 Or

200,000 x (5-4)/5 x 9/12 =30,000 ordinary shares /// Nil/30,000

Nil

1. Warrant /

Nil

2. 5% Convertible debentures /

RM0.038

DEPS (warrant)

RM600,000 / + nil / 7,300,000 / + 30,000 /

RM0.0819

DEPS (5% convertible loan)

RM600,000 / + RM26,600 / 7,300,000 / + 30,000/ +700,000 /

RM0.0780

Incremental EPS 3.Rank the lowest incremental EPS

4. Compute the DEPS following the ranking

5. DEPS (2019)

RM0.0780 /

Both Warrant and 5% convertible debenture has dilutive effect towards the BEPS, it has to be included in the computation of the DEPS. Therefore, the DEPS of RM0.0780 would be reported in the financial statement. (22 x ½ = 11 marks) (Total: 20 marks) QUESTION 2 (a) Schedule of temporary differences (a) ASSETS: Processing machines Cost Accumulated depreciation (303,000x 10% ) Initial allowance (10%) Annual allowance (20%) 31/12/11 Carrying amount Tax base Development cost Account receivable LIABILITY: Specific provision for doubtful debt Penalties

Carrying amount RM 303,000√

Tax Base RM

(TTD)

(DTD)

RM

RM

303,000√

(30,300) √√ (30,300) √ (60,600) √ 272,700 212,100

60,600√

50,000 √ 80,000√

0√ 80,000 √

50,000 √ -

10,000 √

0√

10,000

Permanent difference √

10,000 √

TOTAL

110,600 10,000 TTD DTD (16√ x ½ = 8 marks)

(b)

TTD Tax rate DTL

100,600 √ √ 24% √ 24,144 (3√ x 1 = 3 marks)

(C) Tax expense

BALANCE C/D

DEFERRED TAX BALANCE B/D SOPL 24,144

Deferred tax expense

= 24,144 – 20,000 = RM4,144 √√

Current tax expense

= (120,000 x 24%) √ – 4144 √ = 28,800 – 4144 = 24,656

20,000 4144

(4√ x 1 = 4 marks)

Question 3 Transaction and transportation costs are not considered in identifying the principal market √, because such a market is identified based only on the volume and level of activity √. However, such costs are considered in identifying the most advantageous market, because it is identified based on the net proceeds from the assumed transaction √. Once the market for the transaction has been identified, the measurement of fair value is an independent. Fair value is not adjusted for transaction costs because transaction costs are a characteristic of the transaction, and not a characteristic of the asset or liability √. Fair value is adjusted for transportation costs if location is a characteristic of the asset √. 5√ X 1=5 marks (Total: 20 marks)...