CONFIDENTIAL 1 AC/FEB 2022/FAR410

UNIVERSITI TEKNOLOGI MARA

FINAL ASSESSMENT

COURSE : FAR410
COURSE CODE : FINANCIAL ACCOUNTING AND REPORTING 1
ASSESSMENT : FEBRUARY 2022
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. Please check to make sure that this examination pack consists of:

i) the Question Paper

4. 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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QUESTION 1

Tenang Berhad is a trading company selling women accessories with a share capital of
RM12 million consisting of 4,000,000 Ordinary Shares of RM2 each and 4,000,000 5%
Redeemable Preference Shares of RM1 each. The following is the list of balances extracted
from the accounts of the company as at 31 December 2021.

Debit [RM] Credit [RM]

Ordinary Shares 8,000,000

5% Redeemable Preference Shares 4,000,000
General Reserves 956,000
Retained Profit as at 1 January 2021 1,952,000
10% Bank Loan 1,000,000
Land 6,000,000
Buildings 4,500,000
Motor Vehicles 2,500,000
Office Equipment 750,000
Accumulated Depreciation as at 1 January 2021:
Buildings 900,000
Motor Vehicles 1,500,000
Office Equipment 225,000
Investment 3,800,000
Inventories 2,311,500
Account receivables and payables 2,176,000 1,161,000
Cash at Bank 3,105,000
Allowance for doubtful debts 62,500
Gross profit 8,750,000
Dividend income 365,000
Salaries 1,650,000
Utilities 105,000
Bad debts 11,000
Directors’ remuneration 850,000
Loan interest 50,000
Interim redeemable preference dividend 100,000
Interim ordinary dividend 174,000
Tax paid 515,000
Advertising 75,000
Selling and distribution expenses 199,000
28,871,500 28,871,500

Additional information:

1. The company's net sales for the year amounted to RM29,505,000. On 28 December
2021, a customer ordered a new product from the company and paid a deposit of
RM100,000. The company promised to deliver the product by the end of January
2022. This amount was recorded as sales during the year.

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2. Net realizable value of the inventory at the end of the financial year amounts to
RM2,300,000.

MFRS 102: inventory: lower between cost and NRV

NRV: 2 300 000

Cost > TB: 2 311 500

Inventory: NRV: 2 300 000 > SOFP > CA

Inventory: overstated: 11 500

Overstated: + COS
Understated: - COS
SOPL

3. The following adjustments have not been recorded yet:

 Audit fees of RM8,500 is still accrued at the end of the accounting period.

Current Asset Current Liabilities

Expenses Prepaid Accrued
Revenue Accrued Prepaid

Audit fees: expenses > SOPL

Audit fees > expenses > SOPL: TB NIL + 8 500: 8 500

Accrued expenses: 8 500 > CL > SOFP

SOPL for the year:

Rental expenses: 1000/m : 1 year 12 000

Paid: 10 000

Expenses: SOPL: 12 000

Accrued: 2 000 > CL > SOFP

 The company still owed loan on interest and dividend on redeemable preference
shares.

Interest on loan: 10% x 1 000 000: 100 000

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Accrued interest on loan: 100 000 – TB interest 50 000: 50 000

SOPL: 100 000

Accrued interest: 50 000 > CL > SOFP

RPS dividend
Total: 5% x 4 000 000: 200 000

TB: 100 000 (paid)

Accrued dividend on RPS: 100 000

SOPL: expenses: admin > Total: 200 000

SOFP: accrued expenses: CL: 100 000

 RM300,000 was transferred to General Reserve.

4. During the year, the company purchased a new motor vehicle costing RM250,000.
This cost was already recorded in the accounts.

5. Land is not depreciated but was revalued to RM6,500,000 during the year.

6. Other property, plant and equipment were depreciated as follows:

 Buildings 5% per annum on cost

 Office equipment 10% per annum on net book value
 Motor vehicles 10% per annum on cost

7. Depreciation on building and office equipment are to be charged as administrative

expenses.

8. The depreciation on motor vehicles are to be shared equally by administrative and

selling and distribution department.

9. On 15 December 2021, the board of directors declared a final ordinary dividend of 5%

to be paid on 1 March 2022.

OSC
Add info: Proposed dividend: 5% x 8 000 000: 400 000
TB: interim dividend: 174 000
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Total: 400 000 + 174 000: 574 000 > RP > SOCE

Paid: 174 000

Unpaid: 400 000 > payable > CL as Dividend payable 400 000

Dividend PS: Expenses SOPL > admin

10. The current year taxation is estimated to be RM500,000.

Tax TB: 515 000

Tax Add info > tax for the year: 500 000 > SOPL

Tax payable (CL) /tax recoverable (CA)

Tax add info 500 000 – tax TB 515 000: (15 000) > tax recoverable 15 000
Tax recoverable: 15 000 > CA SOFP

Required:
XX Berhad
Statement of Profit or Loss and Other Comprehensive Income for the year ended xx
Sales 29 505 000
Cost of sales (20 755 000 + 11 500) (20 766 500)
Gross profit 8 738 500
Other operating income x
Distribution cost (x)
Administrative cost (1 000)

(x)
Interest income x
Profit before tax x
Tax expense (tax for the year: tax add info) (500 000)
PROFIT AFTER TAXATION x

x
Other comprehensive income:
Surplus on revaluation x
Total comprehensive income for the year x

Workings:

Opening inventory Xx
+ Purchase Xx
- Closing Inventory (xx)
Cost of sales xx

Administrative Finance cost Selling &

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Distribution
As per TB NIL NIL 199 000
Salaries 1 650 000
Utilities 105 000
Bad debt 11 000
DR 850 000
Interest (50 000 TB + 50 100 000
000 accrued)
Advertising 75 000
Audit fees 8 500
Dividend on RPS 200 000

Taxation
Balance b/d XX Balance b/d XX
Bank XX SOPL XX
Balance c/d XX Balance c/d XX
XX XX

Balance b/d if the opening balance (from trial balance) is tax recoverable
Balance b/d if the opening balance (from trial balance) is tax payable
Balance c/d if the closing balance (from additional information) is tax payable
Balance c/d if the closing balance (from additional information) is tax recoverable

Bad and doubtful debt (allowance)

Trade receivables XX Balance b/d XX
SOPL XX
Balance c/d XX
XX XX

XX Berhad
Statement of Changes in Equity for the year ended xx
OSC RPS Retained General
earnings Reserved
Bal TB 8 000 000 4 000 000 1 952 000 956 000
Prior Year Error (x)/x
Restated balance x x
Current profit x
Surplus or deficit x/(x)
Issued during the x
yr

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Dividend paid (574 000)

(OSC)
Bonus issue x
Balance c/d x x x

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XXX Berhad
Statement of Financial Position as at xx
Non –current assets2020 2019
Property, plant and equipment X
Investment property X
Intangibles assets X
Investment X

Current assets
Cash in hand and in bank X
Short term investment X
Trade receivables X
Tax recoverable 15 000
Inventories 2 300 000

Non current asset held for sale X

Total Assets XX

Equity
Share capital X
Retained earnings X
Other reserves X

Non current liabilities

Bank loan X
Deferred tax X
Deferred gain X
Lease liability X

Current liabilities
Bank overdraft X
Trade payables X
Deferred gain X
Lease liability X
Accrued audit fees 8 500
Accrued dividend on RPF 100 000
Dividend payable (proposed dividend (add info)) 400 000
Accrued interest on loan 50 000
Provision for guarantee X
Total Equity and Liabilities XX

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Notes to the accounts

Property, plant and equipment

Freehold Building Office Motor

Land equipment vehicle
Cost/Valuation
Trial balance 6 000 4 500 750 000 2 500
000 000 000
Prior year adjustment x/(x) x/(x) x/(x) x/(x)
Restated balance x x x x
Additional x x x x
Reclassification x/(x) x/(x) x/(x) x/(x)
Elimination against valuation (x) (x) (x) (x)
Surplus/deficit x/(x) x/(x) x/(x) x/(x)
Disposal (x) (x) (x) (x)
Ending balance X X X X

Accumulated depreciation
Trial balance 900 000 225 000 1 500
000
Reclassification x/(x) x/(x) x/(x)
Elimination against valuation (x) (x) (x)
Disposal (x) (x) (x)
Current year depreciation x x x
Ending balance x x x

Carrying amount x x x x

Prepare the following statements in a form suitable for publication and in compliance with the
Companies Act 2016 and approved accounting standards for publication purposes:

a. Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2021.
(12 marks)

b. Statement of Changes in Equity for the year ended 31 December 2021.

(4 marks)

c. Statement of Financial Position as at 31 December 2021.

(8 marks)

d. Notes on Property, plant and equipment.

(6 marks)
(Show all necessary workings)
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(Total: 30 marks)

QUESTION 2

Radeon Bhd is a manufacturing company located in Selangor. On 1 March 2021, the

company decided to purchase a building and a piece of land in Kerteh to expand their
business in the east coast of Malaysia. The building will be used as the company office and
warehouse for distribution of company goods in that region. The company did not have any
plan yet for the land they purchased. The following costs were incurred related to the
purchased.

RM
Building price 12,500,000
Discount (building) 5%
Brokerage fees (include in building price) 750,000
Legal fees (building) 200,000
Opening ceremony (building) 100,000
Land price 5 000,000
Land clearing 150,000
Building furniture 1,500,000

The estimated useful life of the building was 30 years, and recorded based on the cost
model. The company decided to adopt straight line method to allocate the depreciable
amount of their asset based on the ownership at the end of the year. Any assets owned by
the company besides building will be depreciated at 10% per annum on yearly basis. The
land owned by the company is recorded using the revaluation method. The company closes
their account on 31 December annually.

Required:

a. Describe whether the building purchased by Radeon Bhd can be classified as a

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

b. Describe whether the land purchased by Radeon Bhd can be classified as a property,
plant and equipment in accordance with MFRS 116 Property, Plant and Equipment.
(3 marks)

c. Calculate total initial cost for the asset classified as MFRS 116 Property, Plant and
Equipment as at 1 March 2021.
(3 marks)

d. Calculate the carrying amount for the asset classified as MFRS 116 Property, Plant
and Equipment as at 31 December 2021.
(5 marks)

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e. The company have another building in Selangor. The building was purchased on 1
January 2015 for RM7,500,000 with estimated useful life of 20 years. On 1 July 2021,
the company sell the building to another company for RM5,200,000. The depreciation
of the building is calculated based on its useful life on monthly basis.

Calculate any gain or loss from the sale of building in Selangor. Prepare the journal
entries (show all workings).
(5 marks)

f. The company also bought a piece of land in Pahang for RM1,600,000 on 1 October
2021. The company planned to construct their new factory on that land next year. On
31 December 2021, the fair value of the land was RM1,750,000.

i. Describe whether the land can be classified as MFRS 116 Property, Plant and
Equipment.
(2 marks)

ii. Explain the accounting treatment for the land as at 31 December 2021 including
relevant journal entries.
(3 marks)
(Total: 25 marks)

QUESTION 3

Agric Bhd is a company involved in the processing of a special fertilisers (Inagrow) for resale
to plantation companies. The following transactions occurred during 2021:

1. On 16 January 2021, Agric Bhd purchases 1,000 units of Product X to be used in the
processing of Inagrow from a supplier. The terms of the purchase are as follows:

i. Invoiced price of RM150 per unit less trade discount of RM5 per unit
ii. Non-refundable import duties RM10 per unit
iii. Rebates of RM3 per unit if the total volume of purchases is at least 5,000 units
per quarter.
iv. Transportation cost incurred was RM4,000.
v. Handling cost RM500
vi. Administrative cost incurred RM3,000

Agric Bhd is reasonably certain that its purchases for the first quarter of the year will
exceed 5,000 units based on its past purchases.

2. In order to meet the current demand of fertilisers from numerous customers, the
company purchased a new lorry at RM160,000 to deliver the fertilisers.

3. As at 31 January 2021, the market price of Inagrow is RM120 per unit. The selling
costs are RM10 per unit. At this date, there are 200 units of unsold Inagrow. The cost
to produce Inagrow is RM100 per unit.

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Required:

a. Briefly explain the classification of the following items in accordance with respective
MFRS or the Conceptual Framework.

i. Product X
ii. A lorry
iii. Fertilisers - Inagrow
(5 marks)

b. Determine the total cost of the inventory purchased on 16 January 2021.

(4 marks)

c. Discuss the measurement of inventories (Inagrow) as at 31 January 2021.

     (3 marks)
(Total: 12 marks)

QUESTION 4

A. A manufacturer, Bintex Bhd enters into a contract with a customer, Encik Hud to
design and produce a customer-specific machine, together with installation and after-
sales service. The machine is expected to be completed and delivered within a year.
Encik Hud had paid a refundable deposit of 10% from the sales value.

Required:

a. Discuss whether Bintex Bhd can apply MFRS 15 Revenue from Contracts with
Customers to the contract with Encik Hud.
(2 marks)

b. Determine the performance obligations to be satisfied in the contract in

exchange for consideration. 
(2 marks)

B. K-Machineries Bhd (KMB) is a well-known company which carry out various activities. 
The company closes its account on 31 December every year.  On 30 June 2021, KMB
enters into a contract to transfer a product to Orange Bhd on 30 October 2021. The
contract is structured such that Orange Bhd is required to pay the full contract price of
RM5,000 on 30 November 2021. The cost of the goods transferred is RM3,000. KMB
delivers the product to Orange Bhd on 30 October 2021 as scheduled.

Required:

With reference to MFRS 15 Revenue from Contracts with Customers, advise K-

Machineries Bhd on how to recognize the revenue and support your answer by
showing relevant journal entries. 
(5 marks)

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C. Johan Development Bhd has a contract to construct a cultural complex for a state
government. The company bears all the costs of construction, which are estimated at
RM2.5 million. As consideration, the state government transfers a piece of land to the
company. The land has a market value of RM2.7 million.

Required:

Explain how the transaction price is determined for this transaction.

 (3 marks)
(Total: 12 marks)

QUESTION 5

Given below are the financial statements of Mentari Bhd for the year ended 31 December
2021:
MENTARI BHD
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2021
RM
Revenue 2,525,000
Cost of sales 1,550,000
Gross profit 975,000
Gain on sale of motor vehicle 5,200
980,200
Wages and salaries 235,000
Administrative expenses 268,200
Director’s remuneration 110,000
Rent expenses 9,000
Depreciation 116,100
Interest expenses 27,500
Loss on sale of machinery 8,000 773,800
Profit before tax 206,400
Taxation 55,000
Profit after tax 151,400

MENTARI BHD
Statement of Financial Position as at 31 December

2021 2020
RM RM
Non-current asset
Land 359,000 250,000
Motor vehicle 650,000 536,000
Accumulated depreciation (167,500) (115,200)
482,500 420,800

Machinery 570,000 498,300

Accumulated depreciation (228,600) (212,900)
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436,800 285,400

Current asset
Inventories 269,800 272,000
Accounts receivable 314,700 289,700
Short term investment 4,500 2,300
Bank 440,300 288,500
2,307,600 1,808,700

Equity and reserve

Ordinary shares 1,032,000 800,000
Asset revaluation reserves 109,000 -
Retained profit 360,380 208,980

Non-current liabilities
Bank loan 200,000 250,000
5% Debentures 120,000 -

Current liabilities
Accounts payable 459,420 535,500
Tax payable 10,500 -
Accrued wages and salaries 5,800 6,320
Accrued administrative expenses 10,500 7,900
2,307,600 1,808,700

Additional information:

1. Land was revalued. There was no new acquisition of land during the year.

2. Depreciation charged for the year for motor vehicles and machinery were RM78,600
and RM37,500 respectively.

3. A motor vehicle costing RM71,800 was sold during the year for RM50,700.

4. An existing machinery costing RM120,000 was sold during the year for cash.

5. Dividend paid for the year ended 31 December 2021 was RM38,400.

Required:

Prepare the Statement of Cash Flows for Mentari Bhd for the year ended 31 December 2021
using a direct method in accordance with MFRS 107 Statement of Cash Flows.
(Total: 21 marks)

END OF QUESTION PAPER

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