CONFIDENTIAL 1 AC/JUL 2023/FAR210

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : FINANCIAL ACCOUNTING 3

COURSE CODE : FAR210
EXAMINATION : JULY 2023
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. 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

ii) an Answer Booklet – provided by the Faculty

5. 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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CONFIDENTIAL 2 AC/JUL 2023/FAR210

QUESTION 1

Genius Bhd manufactures and sells computer for market in Grenada. The company is
preparing its financial statements and provided below is the trial balance as at 31 December
2022:

Debit (RM) Credit (RM)

Sales 14,900,000
Cost of sales 7,096,000
Inventories at cost as at 31 December 2022 719,000
Administrative expenses 1,064,000
Selling and distribution expenses 620,000
Directors’ fees 642,500
Auditors’ fees 90,000
Taxation paid 1,800,000
Freehold land as at 1 January 2022 6,000,000
Building at cost as at 1 January 2022 5,940,000
Plant and machinery at cost as at 1 January 2022 3,650,000
Motor vehicles at cost as at 1 January 2022 1,060,000
Accumulated depreciation – 1 January 2022:
Building 931,600
Plant and machinery 1,282,000
Motor vehicles 589,000
Investment 6,800,000
Interim dividend:
Ordinary Share Capital 650,000
Preference Share Capital 136,000
Retained earnings as at 1 January 2022 5,650,000
Asset revaluation reserves 1,467,200
Ordinary Shares Capital 12,000,000
8% Preference Shares Capital 3,400,000
7% Bank loan 3,800,000
Accounts receivable and payable 4,372,400 2,327,400
Investment income 633,000
Interest on bank loan 204,800
Cash at bank 6,250,500
Allowance for impairment of trade receivable as at
1 January 2022 115,000
47,095,200 47,095,200

Additional information:

1. As at 31 December 2022, the net realisable value for inventory was RM609,000.

2. The following information related to the property, plant and equipment of the company
is as follows:

i. The land was revalued by independent valuer to RM7,200,000. The directors

decided to incorporate the new value in its book.

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ii. On 28 December 2022, the company purchased a new motor vehicle amount of
RM75,000 by issuing cheque to Star Auto Bhd. The purchase has not yet recorded
in the books of the company.

iii. The property, plant and equipment are depreciated based on yearly basis as
follows:

Building 2% per annum on cost

Plant and Machinery 10% per annum on cost
Motor vehicles 20% per annum on net carrying amount

Depreciation for building, plant and machinery is to be treated as administrative

expenses and depreciation on motor vehicles are to be treated as selling and
distribution expenses. Land is not depreciated.

3. The following transactions have not yet been adjusted in the company’s books:

i. Directors’ fees of RM85,000 and interest on loan were still accrued.

ii. On 12 December 2022, a customer was declared bankrupt and the outstanding
amount of RM9,700 has to be written off as bad debt.

iii. Allowance for impairment of trade receivable at the year end was RM88,000.

4. As at 31 December 2022, the board of director of the company proposed 5% of final

dividend for ordinary shares held at the beginning of the accounting year.

5. The tax expense for the year was RM1,250,000.

Required:

a. In accordance with the requirements of the Companies Act 2016, MFRS 101
Presentation of Financial Statements and other relevant Malaysian Financial Reporting
Standards:

i. Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 31 December 2022.
(8 marks)

ii. Present the Statement of Changes in Equity for the year ended 31 December
2022.
(5 marks)

iii. Determine the Statement of Financial Position as at 31 December 2022.

(7 marks)

b. Prepare a note on the property, plant and equipment.

(5 marks)
(Total: 25 marks)

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QUESTION 2

Terazzo Bhd is a growing company that is specializes in providing a wide range of terrazzo
series to enhance customer’s residential and commercial design. In fulfilling the company’s
business expansion plan, Terazzo Bhd has decided to acquire a new building in Rembia
Commercial Hub in order to cater the demand in Melaka. The new building will be used for
marketing and administrative office. The new building was purchased on 1 October 2020 and
expected to be used for 20 years. It has to undergo necessary renovation for 4 months and
was officially occupied on 1 February 2021. The company depreciates it at the rate of 5% on
cost, monthly basis. The financial year end of Terazzo Bhd is on 31 December each year.

Below are the costs incurred related to the purchase and renovation of the new building:

Type of cost RM
Purchase price of the building 500,000
Loan processing cost (legal fees, stamp duty on Sales & Purchase 12,000
Agreement)
Upgrading the wiring and electrical system 10,000
General overhead 3,000

Required:

a. Explain briefly whether the new building is item of property, plant and equipment of
Terrazo Bhd in accordance with MFRS116 Property, Plant and Equipment.
(3 marks)

b. Describe whether the new building satisfies the definition of an asset of Terazzo Bhd.
(4 marks)

c. In accordance with the requirements of the Malaysian Conceptual Framework of

Financial Reporting, discuss whether the new building can be recognised in Terazzo
Bhd’s accounting records and financial statements.
(5 marks)

d. Calculate the initial cost of the new building.

(3 marks)

e. Determine the net carrying value of the new building as at the year ended 31 December
2022. (Show all the workings)
(5 marks)

f. Terazzo Bhd has two (2) lorries to deliver the terrazzo to its customers. During the year
2022 the company had incurred RM2,000 for scheduled safety inspection of the lorries
at PUSPAKOM. Under the requirement of the Road Transport Act 1987, all commercial
vehicles must undergo this routine inspection at PUSPAKOM every six (6) months.

Besides that, the company incurred RM5,000 for each of lorry for the annual insurance
and road tax renewal while total deprecation charged for the year was RM5,000.

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Evaluate the accounting treatment for all the expenses incurred to the two (2) lorries in
year 2022.
(5 marks)
(Total: 25 marks)

QUESTION 3

Treasure Bhd is a hardware supplier in Melaka. The company financial year ends every 31
December. An extract of transactions relating to the receivables of Treasure Bhd for the year
ended 31 December 2022 are shown as follows:

Date Transactions
1 June 2022 Treasure Bhd sold goods worth RM15,000 to Earth Bhd and the goods
were delivered on the same day. Treasure Bhd agreed to receive 5%
promissory notes due in 120-days from Earth Bhd.

1 October Treasure Bhd received a cheque amounted to RM20,000 from Bulan

2022 Ent. This serves as a payment for the amount outstanding by Bulan
Ent.

Previously on 28 August 2022, Treasure Bhd had sold goods worth

RM24,000 to Bulan Ent on credit. The credit term agreed is 5/20 net
30. In addition, a trade discount of 2% was granted to loyal
customers such as Bulan Ent. On 29 August 2022, goods worth
RM1,520 was returned by Bulan Ent due to some defects.

Treasure Bhd produced the following ageing analysis of receivables as at 31 December 2022:

Age group Total debts (RM) Expected credit loss rate

(%)
Not due yet 100,000 2%
1 – 60 days 50,000 3%
61 – 120 days 55,000 3%
More than 120 days 22,000 4%

Treasure Bhd estimated its expected credit loss rate based on its historical credit loss
experience and adjusted for forward-looking estimates. An amount of RM3,000 was received
from a debtor, Star Bhd which was written off as bad debt previously. This transaction has
not yet been recognised in the company’s book. The allowance for impairment of trade
receivables for the year ended 31 December 2021 was RM5,500.

Required:

a. Identify whether the transaction on 1 June 2022 between Treasure Bhd and Earth Bhd
give rise to financial asset.
(3 marks)

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b. Explain the type of receivable which arises on 1 June 2022.

(2 marks)

c. Justify whether Treasure Bhd can derecognise Bulan Ent from its accounts receivables
as at 1 October 2022.
(5 marks)

d. Treasure Bhd produced the following ageing analysis of receivables as at 31 December

2022:

Age group Total debts (RM) Expected credit loss rate

(%)
Not due yet 100,000 2%
1 – 60 days 50,000 3%
61 – 120 days 55,000 3%
More than 120 days 22,000 4%

Treasure Bhd estimated its expected credit loss rate based on its historical credit loss
experience and adjusted for forward-looking estimates. An amount of RM3,000 was
received from a debtor, Star Bhd which was written off as bad debt previously. This
transaction has not yet been recognised in the company’s book. The allowance for
impairment of trade receivables for the year ended 31 December 2021 was RM5,500.

Determine the amount to be disclosed in Treasure Bhd’s Statement of Profit or Loss AND
the net realisable of receivables to be disclosed in the Statement of Financial Position
as at 31 December 2022.
(5 marks)
(Total: 15 marks)

QUESTION 4

Comfort Bhd is a wholesaler of bedding items in Melaka. The financial year end of Comfort
Bhd is on 31 December each year. The company purchased 500 units of embroidery bed
sheets on 10 January 2022. The following information are the total cost related to the
purchase:

RM
Purchase price 16,000
Storage cost 300
Salary of the purchasing department clerk 900

The selling price of the embroidery bed sheet is RM100 per unit. Comfort Bhd has incurred
sales commission cost of RM15 per unit.

On 31 December 2022, there are 200 units of embroidery bed sheets remain unsold. During
the stock-take, it was discovered that 20 units of the embroidery bed sheet has discolored and
faded. The company had decreased the selling price of the defect unit by 30% per unit. The
company had also incurred recondition cost of RM10 per unit for the defect embroidery bed
sheets.

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Required:

a. Inventories often represent a significant portion of a business entity’s total assets,

particularly trading &/or manufacturing entities. List TWO (2) types of inventories.
(2 marks)

b. Identify whether the embroidery bed sheets are inventory of Comfort Bhd in accordance
with MFRS102 Inventory.
(2 marks)

c. Compute the value of the unsold embroidery bed sheets as at 31 December 2022.
(6 marks)
(Total: 10 marks)

QUESTION 5

The following are the financial statements of Idaman Bhd for the year ended 31 December
2022.

Idaman Bhd
Statement of Profit or Loss and Comprehensive for year ended 31 December 2022

RM
Turnover 24,000,000
Less: Cost of sales (12,030,000)
Gross profit 11,970,000
Gain on disposal of office equipment 28,000
Administrative expenses (2,000,000)
Selling & Distribution expenses (400,000)
Finance cost (150,000)
Income on investment 32,000
Profit before tax 9,480,000
Taxation (2,275,200)
Profit after tax 7,204,800

Idaman Bhd
Statement of Financial Position as at 31 December 2021 and 2022

2021 2022
ASSETS RM RM
Property, plant and equipment 4,790,000 8,270,000
Investment 5,700,000 6,200,000
Inventory 78,000 50,000
Trade receivable 850,000 31,500
Bank 2,700,000 6,000,500
Cash 503,000 120,000
14,621,000 20,672,000

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2021 2022
EQUITY AND LIABILITIES RM RM
Ordinary shares 8,380,000 12,070,000
Retained earnings 4,000,000 5,601,000
Long term loan 1,230,000 2,788,000
Trade Payable 965,000 200,000
Accrued administrative expenses 20,000 5,000
Tax payable 26,000 8,000
14,621,000 20,672,000

Additional information:

1. Included in the administrative expenses is the depreciation expense for property, plant
and equipment amounting RM50,000.

2. A motor vehicle was purchased during the year by cash.

3. Existing office equipment with the carrying amount of RM300,000 was sold during the
year for cash.

4. Dividend on ordinary shares was declared and paid during the year.

5. There was no disposal of investment during the year.

6. The change in the ordinary share was due to the bonus share.

Required:

a. Prepare Statement of Cash Flow for Idaman Bhd for the year ended 31 December 2022
using DIRECT METHOD and in compliance with MFRS107 Statement of Cash Flows.
(Show all workings.)
(20 marks)

b. Give examples of FIVE (5) transactions that can be classified under cash flow from
investing activities in the statement of cash flow.
(5 marks)
(Total: 25 marks)

END OF QUESTION PAPER

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