FAR510 – JUNE 2017

SUGGESTED SOLUTION
(a) GreenTech Bhd
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2016
  RM’000
Revenue √388,160
Cost of sales [104,110+650] infor 4 √√(104,760)
Gross Profit 283,400
Other Income  
Surplus on revaluation of building- info 1 √100
Amortisation deferred gain (2500/4) info 3 √√625
Expenses  
Administrative expenses (w) √√√(47,900)
Selling and distribution expenses √(20,233)
Finance cost (w) √√(1,402)
Other Expenses:  
Deficit on revaluation of land (3300-2800) infor 1 √(500)
Fair value loss: IP (55,500-52,800) info 2 √(2,700)
Profit before taxation 211,390
Taxation (21,975 + 325) info 5 √√(22,300)
Profit for the year 189,090
Other Comprehensive Income:OCI  
Surplus on revaluation of building info 1 √of 3,600
Deficit on revaluation of land info 1 √ of (2,800)
  189,890

Basic Earnings Per Share = RM2.50

189,090,000 – 1,440,000√ 187,650,000

(w1) BEPS = --------------------------------------- = ----------------- = RM2.50

75,000,000 osc√ 75,000,000

(√20 x ½ = 10 marks)

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Workings:

  Admin Exp Finance Cost

As per TB √41,000 √ 1,002
Dept: Building √of 1,900  
Dept: P&M √of 5,000  
Interest Fin Lease   √ 400
  47,900 1,402

(b) GreenTech Bhd

Statement of Changes in the Equity for the year ended 31 December 2016
Ordinary Preferenc Ret.
  ARR
Share e Share Earnings
  RM’000 RM’000 RM’000 RM’000
Balance as at 1 Jan 2016 √75,000 √15,000 √2,800 √46,400
Profit for the year√       189,090
Land: Rev’n deficit info 1     √(2,800)  
Building: Rev’n surplus info 1     √3,600  
Preference dividend paid       √(1,440)
Transfer to RE (3,600/37) info
    √of(97) √97
1
 Bal c/d (SOFP) 75,000 15,000 3,503 234,147
(√10 x ½ = 5 marks)

(c) GreenTech Bhd

Statement of Financial Position as at 31 December 2016
Non-Current Assets: RM’000 RM’000
Property, plant and equipment√( schedule of ppe)   236,100
Investment property   √ 52,800
Intangible assets   √ 7,800
Current Assets:    
Inventory (18,650-650) info 4 √√18,000  
Accounts receivable √ 44,600  
Bank (36,100 + 20,000-5,250) info 3 √√50,850 113,450
    410,150
Equity:    

Share Capital 90,000

 
Retained Earnings √  234,147
Other reserves   3,503
Non-Current Liabilities:    
Deferred gain (2,500-625-625) info 3   √√1,250
Finance lease creditor (20,000-5250+400-4950) info 3   √√10,200

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8% loan   √10,000
Deferred tax liability info 5   √1,850
Current Liabilities    
Deferred gain info 3   √ 625
Accounts payable   √ 52,500
Finance lease creditor [5250-(3/10x1000)] info 3   √4,950
Tax payable info 5   √1,125
    410,150

Taxation a/c

Dta 1050 Dtl 1525

Tax paid 19800 Sopl 22300
Dtl 1850

c/d 1125**
23825 23825

Land Building P&M

 Note to Property, Plant & Equip  
(RM’000) (RM’000) (RM’000)
Balance as at 1 Jan 2016 156,000 72,000 35,000  
Elimination of Acc Dept-due to
  √(5,400)    
revaluation
Surplus/(Deficit) on revalution √(3,300) √3,700    
Disposal     √(35,000)  
Acquisition: leased assets     √20,000  
Balance as at 30 December 2016 152,700 70,300 20,000  
Acc. Depreciation:        
Balance as at 1 Jan 2016 -  5,400 17,500  
Elimination of AD-due to revalued
  √(5,400) √(17,500)  
building and due to sale & leaseback
Charge for the year (70,300/37)   √√1,900 √√5,000 (20,000/4)
         
Balance as at 30 December 2016 - 1,900 5,000  
Net Book Value 152,700 68,400 15,000 236,100

(√30 x ½ = 15 marks)

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 FAR510 – JUNE 2017

(Total: 30 marks)

QUESTION 2

a.
Since the 4-storey building have multi-use, √ the company has to assess whether each floor
can be sold separately or not√. If it can be sold separately the building shall be classified
separately. √ The 2-storey building occupied will be classified as a PPE√ based on MFRS
116 √ and the 2-storey rented out would be classified as an IP√ based on MFRS140. √ If
the 4-storey building cannot be classified separately then the company has to assess
whether the floor occupied is significant or not. √ In this case, 2 out of 4 bulding are
occupied and therefore it is significant. √ Therefore, the 4-storey building will be classified
as a PPE based on MFRS 116.√

(10√ x ½= 5 marks)

b.

(W)
Borrowing cost to be capitalised :- RM
201
4 9 m x 8% x 10/12 600,000 √√
201
5 9 m x 8% x 10/12 600,000 √√
201
6 9 m x 8% x 8/12 480,000 √√
1,680,000

or (w) 9m x 8% x 28/12 1,680,000

Construction cost 14,500,000 √

Less Rectification costs (600,000) √
Less: Abnormal wastage (80,000) √
Borrowing cost (W) 1,680,000
15,500,000 √

(10√ x ½= 5 marks)

c.

Dr Plant RM8,000,000√
Cr Bank RM3,200,000√
Cr Ordinary Share Capital√ RM4,800,000 √

Dr Bank RM3,200,000√
Cr Plant √ (40%*RM8 million) RM3,200,000

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Dr Depreciation (RM8,000,000- RM240,000√√√

RM3,200,000)/10 * 0.5
Cr Accumulated Depreciation √ RM240,000

(10√ x ½= 5 marks)

d. The old building will be classified as a PPE based on MFRS 116 √from 1 January 2016
√till 31 August 2016 √because it is still occupied by the company√. Once the new building is
completed on 31 August 2016√, the old building can be classified as a non-current asset held
for sale√ based on MFRS 5 √. The carrying amount will be recovered through sale rather than
continuing use√. The old building is now available for immediate sale√ in its present condition
and the sale is highly probable√.

(10√ x ½= 5 marks)

e.

The old building classified as “held for sale” will be measured at the lower of carrying amount
and fair value less cost to sell. √. The carrying amount was RM7,520,000√√. (8,000,000-
480,000 (8mill/50 x 36/12) ) and fair value less cost to sell was RM7,275,000 (7,500,000-
225,000)√√. Therefore building will be measured and capitalised in the SOFP at RM7,275,000√.
Impairment loss of RM245,000√√(7,520,000-7,275,000) will be expensed off in the SOPL√.
Once the building is classified as NCAHFS based on MFRS 5, building is no longer
depreciated√.

(10√ x ½= 5 marks)

(Total: 25 marks)

QUESTION 3

a. The cost incurred for the research cannot be recognised as an intangible asset since there
is no probability that the future economic benefit √ that are attributable to the asset will flow to
the entity. Therefore, the research expenditure of RM100,000 is recognised as expense in
SOPL√ for the year ended 30 December 2015. The development cost of RM250,000 should
also be recognized as expense in SOPL√ since it did not meet the recognition criteria for
capitalization √ of which there is no prospect of the product to be sold in the market √
(uncertainty of future economic benefit).
( 5√ x 1=5 marks)
b.
Happy Toy Bhd should not treat Toboy as having indefinite useful life√ because Toboy is still
new in the market with no proven track record √. Toboy shoud have a finite useful life √ and
need to be amortized on a systematic basis over that useful life. √ The amortisation method
should reflect the pattern of benefits but if the pattern cannot be determined reliably, then
straight line method should be used. √
( any 5√ x 1=5 marks)

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c.
The prototype design cost of RM400,000 √and development work of RM200,000√ and cost of
production of RM700,000√ should be capitalized as part of intangible asset √ and the cost of
upgrading and machine of RM120,000√ is capitalized as part of property, plant and equipment
in the SOFP√. Once commercial production begins, the capitalized development cost can be
amortized √ base on straight line method since the pattern of benefits cannot be measured
reliably. √

Cost of market testing of RM10,000 √ should be recognised as expense in SOPL√

(10√ x ½= 5 marks)

d. Customer list generated by Marketing Department of Happy Toy Bhd cannot be capitalised as
intangible assets√ because it is internally generated. √ Internally generated customer list cannot
be distinguished from the cost of developing the business as a whole√ and the cost cannot be
determine reliably. √ However, Sleeze Bhd can recognised the customer list as its intangible
assets once Sleeze Bhd purchase the customer list from HAPPI TOY BHD. √

(5/ x 1 = 5 marks)

(Total : 20 marks)

SOLUTION 4

a
Bayu Bhd
Statement of Cash Flows for the year ended 31 December 2016√

RM`000 RM`000
Cash flows from operating activities
Loss before tax (4,650) √
Adjustments for :
i.Non operating activities √
Interest receivable (1,800)
Finance costs 1,545 √
ii. Non cash items:
Depreciation expense (12150+1800) 13,950 √√
Loss on sale of non-current assets 1,800 √
Amortization-intangible assets 13,000 √
Operating profit before working capital changes 23,845
Decrease in inventories (inflow) 10,500 √
Increase in trade receivable (44,400) √
Decrease in trade payables (16,850) √
Cash generated from operations (26,905)
Interest paid (1,545) √
Taxes paid (2,500) √√√√
Net cash outflows from operating activities (30,950)

Cash flows from investing activities

Purchase of property (16,500) √√√√

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(90,000-75,000-10,500+12,000)

Purchase of plant and machinery (9,000) √

Disposal of plant and machinery infor 1 2,250 √
Purchase of investment (20,000) √
Interest received 1,200 √√√
Net cash outflows from investing activities (42,050)

Cash flows from financing activities

Dividend paid (2,000) √√√√
Payment of bank loan (750) √
Proceeds from issue of shares (56500-31000) 25,500 √√
Net cash inflows from financing activities 22,750

Net decrease in cash and cash equivalent (50,250)

Cash and cash equivalent at the beginning of period √ 35,750√√
Cash and cash equivalent at the end of period √ (14,500)
√√√

(40 / x ½= 20 marks)
Workings
Beginning Ending
Cash and cash equivalents (RM’000) (RM’000)

Bank overdraft - (22,150) √

Short term investment 18,500 √ 5,800 √
Cash at bank 17,250 √ 1,850 √
35,750 (14,500)

RM’000

property
b/d 75000 Eliminate acc depn 12000
Surplus 10500 c/d 90000
outflow** 16500 acquisition

Interest receivable
Bal b/d 450√ Cash 1,200
SOPL 1,800√ Bal c/d 1,050√
2,250 2,250

Tax payable
Tax payable b/d 1500√
Deferred tax c/d 11,500√ Deferred tax b/d 11,250√

Cash 2,500 SOPL 1000√

Bal c/d (tax recoverable) 250√

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 FAR510 – JUNE 2017

14,000 14,000

Ordinary share capital

Balance b/d 31,000√
Balance c/d 56,500√ Application –OSC / CASH 25,500
56,500 56,500
Retained earnings
Balance b/d 174,750√
Balance c/d 167,550√ Revaluation Reserve 450√
Loss 5,650√
Dividend paid 2,000
175,200 175,200

b The usefulness of statement of cash flows are as follows

The statement of cash flows provides information about changes in a reporting entity’s
economic resources and claims resulting from financial performance reflected by past cash
flows√.

It can help determine whether there's enough cash flow to cover upcoming expenses or
obligations and as a benchmark for the possibility of bankruptcy or liquidation√.

Cash flow statement helps for appraisal of various capital investment programs to determine
their profitability and viability√.

Cash flow statement is significant to management for proper cash planning and maintaining a
proper matching between cash inflows and outflow√.

Cash flow statement helps to identify the sources from where cash inflows have arisen within a
particular period and also shows the various activities where in the cash was utilized√.

Or any other relevant answers

(5√x1=5marks)
(Total:25 marks)

END OF SOLUTION