CONFIDENTIAL 1 AC/DEC 2023/FAR320

UNIVERSITI TEKNOLOGI MARA

SUGGESTED SOLUTION COMMON TEST

COURSE : FINANCIAL ACCOUNTING 5

COURSE CODE : FAR320

EXAMINATION : DECEMBER 2023

TIME : 1 1/2 HOURS

 CONFIDENTIAL 2 AC/DEC 2023/FAR320

SOLUTION 1

A.
i. An intangible asset is identifiable when:
 It is separable (capable of being separated from the entity and sold) √
 It arises from contractual or other legal rights√

(2√ x 1 = 2 marks)

ii. On 1 January 2019, the acquired brand is recognised as intangible asset√ at a cost of
RM300,000 because it meets the definition and recognition criteria of an intangible
asset √. It will be amortized over 10 years and the amortization expense per annum is
RM30,000√ (RM300,000 /10) which is written off to the SOPL√. The carrying amount of
the brand on 31 December 2019 is RM270,000√.

The internally generated customer list cannot be recognized as an intangible asset √

because the cost cannot be distinguished from the cost of developing the business as
a whole√. Thus, the cost of developing customer lists (RM80,000) is written off to the
SOPL. √

(8√ × ½ mark = 4 marks)

iii. Calculate imparment loss on brand at 1 July 2022.

RM
Cost 300,000 √
Less: Accumulated amortisation (105,000) √
(30,000 x 3) + (30,000 x ½)
CA 195,000

RA is the higher of VIU and FV less CTS

VIU 140,000
FV less CTS (150,000 – 6,000) 144,000

Recoverable amount 144,000 √

Impairment loss 51,000 √

(4√ x 1 = 4 marks)

B. In the year 2022, the amortisation expense is RM19,125 (RM153,000/8) which is

written off to SOPL√. As at 31/12/2022, the carrying amount of the franchise is
RM133,875√ and the fair value is RM130,000. This results in a deficit on
revaluation of RM3,875. √ Since this is a subsequent revaluation, RM3,875 of the
ARR is reversed√. The accumulated amortisation of RM19,125 is eliminated. The
new carrying amount of the franchise as at 31/12/2022 is RM130,000.

(4√ x 1/2 = 2 marks)

 CONFIDENTIAL 3 AC/DEC 2023/FAR320

Workings:

Particular (RM)
Year
2022 FV 153,000
Accumulated amortisation (153,000/8) (19,125)
31/12/2022 Carrying value 133,875
Deficit in revaluation (3,875)
31/12/2022 Revalued amount 130,000

C.
i. Year 2019
The cost of RM500,000 incurred for research is written off to the SOPL in the year
2019√ because there is uncertainty with regard to the flow of future economic benefits
to the entity. √ Meanwhile the cost incurred amounted to RM1,000,000 (RM1,500,000 –
RM00,000) qualified as the development expenditure√. The carrying amount of the
development cost on 31 December 2019 is RM1,000,000√.

Year 2020
The development expenditure of RM648,000√ (RM700,000 – RM52,000) incurred in
2020 can be capitalised as intangible asset √ since the project meets the capitalisation
criteria. √ The market research of RM52,000 should be written-off to the SOPL. √
(8√ × 1 mark = 8 marks)

ii. Journal entries to record all transactions for the year ended
For year ended 31/12/2022 Debit Credit
Dr Accumulated amortisation√ 164,800
Cr IA – franchise 164,800√
(1648,000 / 10)

Dr IA-Development cost√ 128,800

Cr ARR 128,800√
(1,612,000 – 1,583,200)

Dr SOPL – amortisation 179,111√

Cr Accumulated amortisation 179,111
(1,612,000/9)
(5√ × 1 mark = 5 marks)
Total: 25 marks
CONFIDENTIAL 4 AC/DEC 2023/FAR320

SOLUTION 2

i. State TRUE or FALSE

a. False
b. False
c. True
3 x 1 = 3 marks

ii. Agricultural activity is the management by an entity of the biological transformation√ and
harvest of biological assets for sale√ or for conversion into agricultural produce√ or into
additional biological assets√.
√4 x ½ = 2 marks

iii.
RM RM
Gain in FVLCTS due to price change
2.5-year-old: 30 x (1,650-1,400) √√√ 7,500
1-year-old: 50 x (850-800) √√√ 2,500
Newborn: 30 x (600-550) √√√ 1,500
11,500

Gain in FVLCTS due to physical change

2.5-year-old – 3.5-year-old: 30 x (2,400-1,650) √√√ 22,500
1-year-old – 1.5-year-old: 50 x (960-850) √√√ 5,500
Newborn – 1-year-old (purchase): 30 x (850-600) √√√ 7,500
Newborn: 10 x 600 √√ 6,000
41,500
Total Revenue √ 53,000√of

√22 x ½ = 11 marks

iv. Journal entries

Dr Cr
RM RM
1/7/2022
Biological asset (30 x RM550) 16,500√
Bank √ 16,500

30/6/2023
Biological asset (10 x RM600) 6,000√
SOPL-gain in FVLCTS √ 6,000

√4 x 1 = 4 marks
CONFIDENTIAL 5 AC/DEC 2023/FAR320

v. Carrying amount of biological assets as at 30 June 2023.

RM
Balance 1/7/2022 (30 x RM1,400) 42,000√
Purchased newborn 1/7/2022 (30 x RM550) 16,500√
Purchased 1-year-old 1/1/2023 (50 x RM800) 40,000√
Gain in FVLCTS due to price change 11,500√of
Gain in FVLCTS due to physical change 41,500√of
Balance as at 30/6/2023 151,500

OR

RM
3.5-year-old: 30 x RM2,400 72,000√
1.5-year-old: 50 x RM960 48,000√
1-year-old: 30 x RM850 25,500√
Newborn: 10 x RM600 6,000√√
Balance as at 30/6/2023 151,500

√5 x 1 = 5 marks
Total: 25 marks

END OF SUGGESTED SOLUTION