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1, 2016/2017


2.30 pm – 5.30 pm 29/12/2016

ACC 1101/K 1-4

Financial Accounting & Reporting 1

Answer ALL questions

Sireal Products Berhad is a manufacturer and retailer of dairy products. The following
balances have been extracted from the ledger accounts of the company at 31 December 2015.

Debit Credit
Sales 4,837,000
Cost of sales 2,972,000
Selling and distribution expenses 928,000
Administrative expenses 144,000
Other operating expenses 35,400
Finance income 1,130
Finance costs 34,370
Other income 1,400
Income tax expense 136,900
Other comprehensive income:
Revaluation reserve 57,825
Share capital 234,500
Revaluation reserve 138,290
Retained earnings 474,100
Dividend 715,225
Property, plant and equipment, net 1,369,800
Intangible assets 62,800
Long-term investments 29,110
Inventories 414,260
Trade and other receivables 581,900
Cash and cash equivalent 19,100
Unearned sales revenue 77,540
Bank loans 96,450
Trade and other payables 1,484,650
Income tax payable 39,980
7,442,865 7,442,865

The following additional information is available at 31 December 2015.

a. Accrued salaries, an administrative expense amounted to RM 6,900.
b. Unearned sales revenue that has been earned for the year 2015 amounted to RM
c. Depreciation on property, plant and equipment has yet to be charged. Sireal Berhad
charges depreciation at a rate of 10% per year. Depreciation expense is recorded
under administrative expense.
d. The bank loan was taken at the beginning of 2014 and finance costs is payable at 4%
per year. Finance cost was paid for the year-ended 31 December 2014 but the finance
cost for 2015 remained unpaid and unrecorded at 31 December 2015.

1. Prepare a statement of profit or loss and other comprehensive income, a statement of
changes in equity for Sireal Products Berhad for the year ended 31 December 2015
and a statement of financial position as at that date in a form suitable for publication.
Notes to the financial statement are not required.
(18 marks)
2. Prepare journal entries required to reflect item (d) above. (2 marks)
The following situation relates to the credit sales, collection of accounts receivable and
write-off policy for Luxe Trading Sdn. Bhd. for the year ended 31 December 2015.
Luxe Trading made a credit sales of RM6,450 to a customer, Bloom. The sales were
made on 15 March 2015 and goods were delivered to Bloom, along with invoice for
RM6,450, credit term, 2/15, n/45.
Luxe Trading has a policy to write-off its accounts receivable after 180 days from the
invoice date. On 15 September, after maximum attempts to collect from Bloom failed, his
balance of RM6,450 was written-off as uncollectible.
At 31 December 2015, the ledger balances relating to the accounts receivable and the
Allowance for doubtful account before the adjustment for write-off are as follows.
Accounts receivable 548,250
Allowance for doubtful account 12,028
Past experience of the company suggests 3% of account receivable proves to be
uncollectible and bad debt expense is provided at year end 31 December 2015.
On 31 December 2015, the company received a payment of RM6,450 from Bloom, along
with a letter apologising for the delay.
a. Prepare the journal entries to record the recovery of RM6,450 from Bloom. Show
where the recovery of bad debts appear on the financial statement.
(4 marks)
b. Calculate the bad debt expense at 31 December 2015. Prepare the journal entries to
record the bad debt expense.
(4 marks)
c. Show how the Accounts receivable and Allowance for doubtful account appear on the
statement of financial position at 31 December 2015.
(2 marks)

NueNews Bhd. (NNB) is a company that broadcasts and publishes news. NNB specialises in
gathering and broadcasting the national news. NNB also publishes news related to the local
stars and celebrities on a daily online magazine. However, NNB’s main revenue from
publishing is earned from their monthly printed magazine called “Bintang Buzz” that shows
the latest fashion worn by the local stars and celebrities that month.
NNB owns the copyright for Bintang Buzz since the year 2009. Due to the popularity of
Bintang Buzz, NNB has become a recognised name among Malaysians. Also, the teenagers
and young adults prefer to subscribe to NNB’s online website compared to any other online
At the beginning of January 2015, NNB purchased 3 helicopters, which costs RM 1,500,000
each. NNB needed the helicopters to cover the news more efficiently. NNB had to pay RM
18,000 for a permit allowing NNB to fly the helicopters in Malaysian skies. NNB had to
incur additional costs of RM 60,000 to have speciality glass windows fixed on all 3
helicopters to reduce reflection from sunlight so that they could use their cameras to record
the news more clearly from inside the helicopters. The useful life of the helicopters is 30
years. The expected residual value at the end of the useful life is RM 2,160,000 for all 3
a. Based on the above, identify two (2) intangible assets of NNB (2 marks) and state
whether each of the intangible assets that you have identified should be recognised by
NNB (2 marks).
Provide a brief explanation to support your answer of whether each specific intangible
asset should be recognised or should not be recognised. (4 marks) [8 marks]

b. Using the straight line depreciation method, calculate the annual depreciation of the 3
helicopters AND calculate the net book value of the helicopters as at year ends on 31
December 2015 and 31 December 2016, respectively. [6 marks]

c. In order to access the online magazine, customers are required to pay subscription
fees in advance. The subscription can be on a monthly or yearly basis. Once the
customers make payment, they are granted access to view the online magazine.
Customers are allowed to cancel their subscription at any time by contacting and
notifying NNB. When there is a cancellation of subscription, the remainder of the
amount of subscription fees is returned to the customer.

Required: Considering the circumstances above, discuss when revenue should be

recognised. Explain why revenue should be recognised at that point. [4 marks]
[Total = 18 marks]

EasyCook Sdn Bhd. (ECSB) imports technologically advanced multi-functional rice cookers
from Japan. The business only started in 2015, but these rice cookers have become very
popular as they are energy efficient and take only 5 minutes to cook a pot of rice.
At the end of September 2015, ECSB had only 20 units of these rice-cookers left. These rice
cookers costs RM 23 each.
The following table presents the movement of inventory of these rice cookers from ECSB for
the year ended 30 September 2016:
Month Quantity purchased & Quantity Sold &
Cost per unit (RM)* Selling Price per unit (RM)
October 2015 1,000 units @ RM 28
December 2015 900 units @ RM 80
January 2016 1,500 unit @ RM 32
March 2016 700 units @ RM 90
May 2016 600 units @ RM 95
July 2016 1,800 units @ RM 39
September 2016 1,300 units @ 97
* The costs per unit is after translating from Japanese Yen to Malaysian Ringgit (RM)
Additional information: ECSB uses the perpetual inventory system.
a. Calculate the cost of sales and the value of the ending inventory using the First-In
First- Out (FIFO) inventory valuation method. (6 marks)

b. Calculate the cost of sales and the value of the ending inventory using the weighted
average inventory valuation method. (8 marks)

c. Calculate the revenue of ECSB for the year ended 30 September 2016. (2 marks)

d. It was discovered that 10 units of the ending inventory that was remaining at the end
of September 2016 were slightly damaged, hence the net realizable value of these 10
units of rice-cookers were no longer RM 97 but was now only RM 65. What would
be the value of ending inventory under FIFO method and weighted average method
taking into consideration this damaged inventory? Explain your answer. (3 marks)



a) Identify which enhancing qualitative characteristics is described by the following


i. A company chooses to use FIFO method of inventory valuation over different


ii. A company prepares interim financial report and makes it available in the
company’s website.

iii. Expenses in the statement of profit or loss are classified according to its function.
(3 marks)

b) For each of the scenarios given below, indicate whether it should be classified as
liability, provision or contingent liability. Justify your answer. (Note: The scenarios are
independent of each other).

i. Company A received a RM2,000,000 fine by the Department of Environment for

dumping toxic chemicals into rivers.

ii. After being fined for polluting the environment, Company B was ordered to bear the
cost to clean up the environment. The expected clean-up cost is RM750,000.

iii. Company C was sued by a group of local travel agencies who claimed that the
environmental pollution done by the company has led to the reduction in the number
of tourists in the area. They are seeking a compensation for loss of revenue
amounted to RM1.5 million. The company’s lawyer advised that it is possible that
the company will actually be found liable.
(3 marks)

c) Lemon Tea Berhad has an authorised capital of 2,000,000 ordinary shares of RM1 each.
Below is the extract of Statement of Financial Position of the company as at 1 January
Ordinary share capital 800,000
Share premium 60,000
Retained earnings 108,500

The following transactions occurred in 2016 but have not been recorded:

1) On 1 January 2016, the company issued 6% RM80,000 par value bonds payable for
RM73,612. The bonds pay interest on 31 December annually and will matures in
five years. The annual market rate on the date of issue is 8%.
2) The company issued a prospectus to the public to invite for subscription of 300,000
ordinary shares at a value of RM2.50 each. All shares were fully subscribed and
payable in full upon application. The costs of share issue is RM22,000.
3) In July 2016, the company paid interim dividend of RM50,000.
4) Issued bonus shares at par, at a ratio of one for every ten shares held. The share
premium account is utilised for this purpose.
5) At the end of the year, the board of directors declared a final dividend of
RM65,000. The dividend will be distributed to shareholders in March 2017, subject
to approval in the forthcoming annual general meeting to be held in February 2017.
6) On 31 December 2016, the company paid interest to its bondholders.


i. Journalise the above transactions (Narrations are not required). Where no entries are
required, state your justification.
(9.5 marks)
ii. Prepare the equity and non-current liabilities sections of Statement of Financial
Position of Lemon Tea Berhad as at 31 December 2016.
(3.5 marks)
iii. Explain why redeemable preference shares is classified as a liability instrument
instead of an equity instrument?
(1 mark)

Ohsem Berhad is a company that sells nutrition supplements and health care products. The
financial statements of the company for the year ended 30 June 2016 is shown below:

Statement of Profit or Loss for the year ended 30 June 2016

Sales 854,400
Cost of sales (225,500)
Gross profit 628,900
Salaries expense (249,700)
Finance costs (3,500)
Other expenses (253,600)
Profit before tax 122,100
Income tax (62,300)
Profit for the year 59,800

Statement of Financial Position as at 30 June
2015 2016
Intangible assets 145,000 138,000
Property, plant and equipment 424,800 547,400
Inventories 56,400 43,800
Trade receivables 106,300 144,600
Cash and cash equivalents 67,700 91,900
Total assets 800,200 965,700

Share capital 300,000 350,000

Share premium 42,000 86,000
Retained earnings 298,400 323,200
Total equity 640,400 759,200

10% bonds payable - 70,000

Trade payable 63,900 40,800
Accruals 41,600 33,400
Tax payable 54,300 62,300
Total liabilities 159,800 206,500

Total equity and liabilities 800,200 965,700

Additional information:

1. All sales are on credit.

2. Included in other expenses are:
Depreciation of property, plant and equipment 61,500
Impairment of intangibles 7,000

3. There are no disposal of property, plant and equipment during the year.
4. The company paid dividends to its shareholders amounted to RM35,000.
5. The increase in share capital is due to issue of shares at a premium.
6. The 10% bonds payable were issued on 1 January 2016 at par.


Prepare a Statement of Cash Flows for Ohsem Berhad for the year ended 30 June 2016 in
accordance with MFRS 10 7 Statement of Cash Flows using direct method.