Part A Answer ALL Questions.: Confidential AC/JUN 2010/FAR360 2

CONFIDENTIAL 2 AC/JUN 2010/FAR360
PART A
Answer ALL questions.
1. Explain briefly THREE (3) primary forms of business organizations.

(6 marks)
2. A reliable information system is a necessity for the operation of any organization.

Differentiate between Accounting Information System (AIS) and Management
Information System (MIS).
(4 marks)
3. A cost unit is any activity for which a separate measurement of costs is desired. Costs
that are assigned to cost unit can be divided into two (2) categories. Distinguish between
direct cost and indirect cost. Give TWO (2) examples of each.
(6 marks)
4. Costing systems can vary in terms of which costs are assigned to cost units and their
level of sophistication. Identify and explain each of the FOUR (4) stages involved in
designing Activity-Based-Costing (ABC) system.
(6 marks)
5. There are several techniques in capital budgeting decision. One of the commonly used
techniques is payback period. Briefly explain THREE (3) benefits and THREE (3)
drawbacks of payback period as a means of capital budgeting decision.
(6 marks)
6. Audit documentation is also referred as working papers. Explain clearly the following
audit working papers and give an example for each.
a) Permanent Files
b) Current Files
(6 marks)
7. Distinguish clearly between balancing charges from balancing allowances and how they
are being treated in the tax computation of a company.
(6 marks)
8. Differentiate between conversion cost and period cost.

(4 marks)
9. Hanun is the major shareholder of Bumi Indah Berhad. She does not understand why
some companies have both internal and external auditors. She argues that both types of
auditors are actually performing similar functions. Do you agree with her argument?
Discuss.
(6 marks)
(Total: 50 marks)
 Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

PART B
QUESTION 1
AZNAD Sdn Bhd runs a computer company. The company’s financial year end is 31
December. Financial statements of the company for two consecutive years are as follows:-
Income Statement for the year ended 31 December

2009 2008
Note
RM RM
Sales 4,500,000 3,750,000
Less: Cost of sales (2,700,000) (2,473,500)
Gross profit 1,800,000 1,276,500
Gain on sale of property, plant and equipment 1 15,000 -
1,815,000 1,276,500
Less:
Administration expenses 2 (420,300) (463,000)
Selling and distribution expenses 3 (102,000) (137,600)
Finance expense (56,000) (52,500)
Operating expenses (175,000) (160,000)
Profit before tax 1,061,700 463,400
Tax expense (265,425) (120,484)
Profit after tax 796,275 342,916
Balance Sheet as at 31 December

2009 2008
RM RM
Non-current assets
Property, plant and equipment 3,250,300 2,980,200
Current Assets
Inventory 417,000 519,800
Short term investments 100,000 -
Trade receivables (net) 863,250 649,000
Prepayments - 4,400
Bank 29,700 71,800
Total Assets 4,660,250 4,225,200
Share capital 1,000,000 1,000,000

Reserves 1,540,350 495,200
Non-current liabilities 1,500,000 1,800,000
Current liabilities
Trade payables 612,000 917,000
Accruals 7,900 13,000
Total equity and liabilities 4,660,250 4,225,200

Notes to the account:
1. Gain on disposal of motor vehicle was in respect of non-commercial vehicle

purchased on 1 January 2007 at RM50,000 and was disposed off in June 2009 at a
value of RM32,000.
2. Administration expenses consist of :
a. Payroll expense of RM300,000 which comprises of salaries and bonuses of

RM238,000, salary for handicapped employee of RM3,600 and EPF contribution of
RM58,400.
b. Depreciation for year of assessment 2009 is RM24,000.
c. General expenses of RM37,500 which comprise of entrance fee to trade
association amounting to RM4,000, allowance for practical training (approved) of
RM2,000 and compensation paid to a client who sued the company for late delivery
of goods of RM31,500 where the case has been settled out of court.
d. Donation was made to Institut Jantung Negara of RM15,000.
3. Selling and distribution expenses consist of:
a. RM15,000 for travelling expense represented the cost of air tickets for holiday
passage for company’s employees while RM20,000 was for business travelling.
b. Entertainment expenses of RM67,000 includes of RM36,000 for dinners and lunches
to clients and RM31,000 for meals provided to employees on family day.
4. Capital allowance for the year of assessment 2009 is RM20,500.
Required:
1. The company records its inventory based on cost. In the audit findings, the net reliasable
value of the inventory was RM389,000. The auditor has advised the management to
amend the inventory figure. However, the management refused to do so. Except the
inventory balance, other figures have been fairly presented.
a. Discuss the type of report that should be issued by the auditor and the reason for the
type of report issued.
(5 marks)
b. Briefly explain FOUR (4) types of audit techniques used in collecting audit evidence.
(8 marks)
2. Compute the income tax payable by AZNAD Sdn Bhd for the year of assessment 2009.
(20 marks)

3. From the following information:
a. Draw up a bank reconciliation statement from the details below as at 31 December

2009 for AZNAD Sdn Bhd:
RM
Total amount of cheques which not yet presented to

the bank account 15,000
Total amount of lodgment which not yet credited to the 8,000
bank account
(5 marks)
b. What is the main purpose of preparing a bank reconciliation statement?

(2 marks)
4. In view of the current stiff competition, Teluk Gadong Sdn Bhd has decided to diversify
into a new business. The new business requires an acquisition of a new machine costing
RM2.5 million. The project is expected to generate income of RM450,000 per annum for
the next 10 years. The project’s cost of capital is 15% and depreciation is expected to be
on a straight line basis within 10 years useful life. The salvage value of the asset is
expected to be RM600,000.
You are required to calculate the following:
a. Payback period of the project.

(2 marks)
b. Accounting rate of return (ARR) of the project.
(3 marks)
c. Net Present Value (NPV) of the project. Based on your answer, comment with
reason(s) whether Teluk Gadong Sdn Bhd should invest into the project.
(5 marks)
Note:
• Present value factor for 10 years @ 15% is 0.2472.
• Present value annuity factor for 10 years @ 15% is 5.0188.
(Total: 50 marks)
END OF QUESTION PAPER

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CONFIDENTIAL 2 AC/JUN 2010/FAR360

Answer ALL questions.

1. Explain briefly THREE (3) primary forms of business organizations.

2. A reliable information system is a necessity for the operation of any organization.

8. Differentiate between conversion cost and period cost.

 Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

Income Statement for the year ended 31 December

Balance Sheet as at 31 December

Share capital 1,000,000 1,000,000

 Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

Notes to the account:

1. Gain on disposal of motor vehicle was in respect of non-commercial vehicle

2. Administration expenses consist of :

a. Payroll expense of RM300,000 which comprises of salaries and bonuses of

3. Selling and distribution expenses consist of:

4. Capital allowance for the year of assessment 2009 is RM20,500.

 Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

3. From the following information:

a. Draw up a bank reconciliation statement from the details below as at 31 December

Total amount of cheques which not yet presented to

b. What is the main purpose of preparing a bank reconciliation statement?

You are required to calculate the following:

a. Payback period of the project.

END OF QUESTION PAPER

 Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

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