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PART A Answer ALL questions. 1. Accountancy is the art of communicating financial information about a business entity to users. The communication is generally, in the form of financial statements which includes five (5) statements. Required: a) State and describe any FOUR (4) of the statements. (8 marks) b) Explain the following FOUR (4) accounting principles that need to be followed when presenting financial statements in accordance to Financial Reporting Standards (FRS) 101 Presentation of Financial Statements: • • • • 2. Going concern Consistency Accrual basis Materiality (8 marks)

Payback period and net present value (NPV) are among the common techniques that are used for capital budgeting. Discuss each of these techniques. (6 marks) Management accountant must be able to justify any kind of cost as either direct or indirect. Distinguish between direct and indirect cost. Please provide TWO (2) examples of each cost. (4 marks) Break-even analysis or cost volume profit relationship as it is also known is concerned with relationships between cost, volume and profit. Briefly explain FOUR (4) uses of break-even analysis. (4 marks) MIA By-Laws (on professional ethics, conduct and practice) provides a set of principles and rules that offer guidance to the members. Explain the following fundamental principles stipulated under the by-laws: a. Professional competence and due care (4 marks) b. Confidentiality (4 marks)

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Financial analysis is the assessment of a firm’s past, present and anticipated future financial performance that is made based on the firm’s financial statements. Explain THREE (3) purposes of analyzing the financial statements. (3 marks)
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Under self assessment system, companies are required to furnish an estimate of income tax payable for a year of assessment (YA) in a prescribed form (CP 204) not later than 30 days before the beginning of the basis period. Briefly explain the penalty to be imposed by Inland Revenue Board for underestimation of income tax payable. Determine the timing for the submission of the tax return form. (5 marks) Double deduction refers to expenses incurred that are given twice deduction in calculating income tax expense of a company. State TWO (2) conditions that a company needs to fulfill in order to obtain this relief? Provide TWO (2) examples of expenses qualified for double deduction. (4 marks) (Total: 50 marks)

8.

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PART B QUESTION 1 Sejiwa Sdn Bhd is a newly established company which concentrates in producing two types of television models TV-52 and TD-54. The company was incorporated in early 2009 and is currently operating from its permanent premise located in Oakland, Seremban. The company has two production cost centers (Department A and B) and one service cost center (Department S) in its factory. Encik Lokman, Chief Executive Officer (CEO) was so excited to know the actual performance of the company. The list of account balances of the company for the year ended 31 December 2009 are as follows: Plant and machinery at cost Motor vehicles at cost Sales Direct factory wages Raw material purchased Light and power Rent and insurance Indirect factory wages Machinery repairs Motor vehicles expenses Administration expenses Administrative salaries Sales and distributions staff salaries Share capital Account receivables Account payables Bank RM 250,000 75,000 1,006,170 90,000 480,000 95,000 85,000 20,000 30,000 35,000 10,000 50,000 15,000 3,500,000 160,000 270,000 100,950

The following are the additional information for the above balances: 1. The closing inventory as at 31 December 2009 for raw materials is RM30,000, work in progress is RM40,000 and no finished good in hand. 2. It is the policy of the company to depreciate its assets using the straight line method. The company estimates the plant and machinery and motor vehicles will be used in the business for 10 years and 5 years respectively. Both of the assets have no residual values. 3. Insurance paid during the year amounted to RM50,000 which is included in the rent and insurance account. This payment is for one year’s premium beginning 1 April 2009. 4. 30% of depreciation of motor vehicles and motor vehicle expenses and three quarter of expenses for light and power, rent and insurance will be charged to factory.
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5. Goods manufactured during the year are to be transferred from the factory to income statement at cost plus 10% mark-up. Required: a) As an accountant of the company, you are required to prepare the manufacturing account and income statement of the company for the year ended 31 December 2009. (16 marks) b) In addition to question 1(a), Encik Lokman is also concerned about the sales of the products and his target to achieve 10% of the market share within the television industry. He would like to know the detail information about the costs of the products. This will help him to make better decision whether the company sells its products at accurate price in order to attract more customers. Sejiwa Sdn Bhd calculates the departmental predetermined overhead absorption rate for each of its production cost centers on the basis of budgeted machine hours. According to the production manager, the budgeted machine hours was used because the company highly depends on machine to manufacture the products. The budgeted production overhead data for the year 2009 is as follows: Allocated costs Reapportioned costs Machine hours Direct labour hours Department A RM105,000 RM52,000 21,750 hours 7,700 hours Department B RM115,000 RM28,000 15,250 hours 37,300 hours Department S RM80,000 (RM80,000)

The following information is also related to the production of TV-52 and TD-54: Prime costs Machine hours: Department A Department B Profit mark-up TV-52 RM 85 5 hours 2 hours 25% from production cost TD-54 RM 150 8 hours 6 hours 25% from production cost

However, En. Remy, the finance manager, believes that the company’s current product costing system produces misleading costs information. He argues that the company has over and under estimated its product cost for TV-52 and TD-54 respectively. He suggests to use the activity based costing system to allocate the overhead cost into product cost as an alternative method. The following cost pools and cost drivers are established: Cost pools Order processing Machine processing Product inspection Cost drivers No. of order processed Machine hours worked Inspection hours RM . 30,250 210,000 59,750 300,000
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Data relevant to these activities are as follows: Products TV-52 TD-54 Required: i. Calculate the overhead absorption rate for each production cost center for the period using the company’s current policy. (Answers to be rounded to two decimal places in RM) (2 marks) Calculate the unit selling price for both TV-52 and TD-54 using traditional costing system and activity based costing system (show all working). (13 marks) Advice Encik Lokman on how the company’s traditional costing system distorts product costs and selling prices. (5 marks) Total units produced 2009 5,000 500 No. of cost Orders processed 350 200 driver volume consumed Machine Inspection hours worked hours 35,000 10,000 7,000 15,000

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c) Yusof Kadir & Co. Chartered Accountants has been approached by the management of Sejiwa Sdn Bhd to become the company’s external auditor. Required: i. ii. iii. Discuss briefly the procedures to be carried out by the auditor prior to accepting the appointment. (5 marks) Discuss the main contents of an engagement letter. (6 marks) State three (3) reasons why the auditor should properly plan an engagement? (3 marks) (Total: 50 marks)

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