BKAR1013 FINANCIAL ACCOUNTING AND REPORTING 1

QUESTION 1 (20 MARKS: 36 MINUTES)

A. During the year 2020, Akasia Maju Bhd (AMB) purchased a piece of land with an
existing building for RM1,125,000. The land was valued at RM1,050,000 and the
building at RM75,000. AMB demolished the building and constructed a new building
as headquarters on the site. The new building and land improvement are expected to
last for 80 years with no residual value and the construction was fully completed by
the end of the year 2020.

The following represents the various items related to the project in year 2020:

Items RM
Lawyer’s fee to close the purchase deal 22,500
Cost of land fill and clearing 18,000
Architect’s fee 120,000
Fencing around the land 60,000
Cost of demolishing existing building 97,500
Interest on financing of construction paid during construction 282,000
Receipts from sale of demolition scraps 15,000
Construction costs 1,200,000
Landscaping (trees and shrubs) 30,000
Parking lots and concrete walks on the property 180,000
Insurance premium during construction period 18,000
Moving costs from old headquarters to new headquarters 150,000

To accommodate the mission of improving productivity and efficiency, the company

also bought a new special equipment and made the following payments.

Items RM
Manufacturer’s list price 4,303,500
Trade discount 37,500
Delivery charge 75,000
Installation charge 50,250
Additional components to increase capacity 107,250
Service and maintenance 24,750
Replacement parts 17,000
Test runs 16,500
Small spare parts 2,600

During the test runs, some samples were produced and sold. The proceeds from these
samples amounted to RM15,000.

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 BKAR1013 FINANCIAL ACCOUNTING AND REPORTING 1

REQUIRED:

Calculate the cost of land, land improvement, building and equipment based on
MFRS 116 Property, Plant and Equipment. Please show your calculations.
(14 Marks)

B. An intangible asset is an asset that has no physical substance. Although it is not an

asset that can be seen or touched, intangible assets are also valuable to an entity, and
can influence its long-term performance. Several types of intangible assets are
encountered in practice such as patent and trademark. Following are the statements
related to intangible assets:

(i) A sign which distinguishes the goods and services of one entity from those of
another.

(ii) A form of protection provided by the law to authors of original creative works,
including literary works, musical works, artistic works, films, sound recordings,
and broadcasts.

(iii) The application of research findings or other knowledge to a plan or design for
the production of new or substantially improved materials, devices, products,
processes, systems or services before the start of commercial production or use.

(iv) A method of marketing and distributing products and services based on a two-
party contract.

(v) An exclusive right granted for an invention, which is a product or a process that
provides a new way of doing something or offers a new technical solution to a
problem.

(vi) A license required in order to use properties or rights owned by other entities,
such as broadcasting licenses for radio and TV stations, licenses for insurers,
and landing rights for airline operators.

REQUIRED:

(a) For each of the statement above, state the types of intangible assets that best
suit them.
(3 Marks)

(b) Identify and briefly explain the THREE (3) criteria of intangible assets based
on MFRS 138 Intangible Assets.
(3 Marks)

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QUESTION 2 (15 MARKS: 27 MINUTES)

Palma Putih Bhd began operations in 2020 by selling a single product. Data on purchases
for the year are as follows:

Purchases
Date Units Purchased Unit Cost (RM) Total Cost (RM)
18 April 2,300 13.00 29,900
9 May 2,500 14.00 35,000
13 June 2,600 14.20 36,920
10 July 2,300 15.00 34,500
16 August 1,700 15.25 25,925
14 October 800 15.50 12,400
12 November 500 15.75 7,875
9 December 500 17.00 8,500

On 5 January 2021, the president of the company, Mr. Haikal, reported 5,000 units
physical inventory from stock count that was taken on 31 December 2020. Other
financial information for Palma Putih Bhd for the year ended 31 December 2020 are as
follows:

Detail Information RM
Total sales 362,500
Sales discount and allowance 12,000
Salaries and wages expenses 48,000
Distribution costs 22,000
Administrative costs 39,000
Finance costs 3,000
Other expenses 3,500
Taxation 36,000

REQUIRED:

(a) Determine the cost of inventory under the periodic system using First-In, First-Out
(FIFO) method as at 31 December 2020.

(3 Marks)
(b) Determine the net profit for the year under ended 2020.
(8 Marks)

(c) Palma Putih Bhd plans to expand its product line. Therefore, the president asked for
your advice on the use of a perpetual inventory system in the future. Discuss TWO
(2) advantages and TWO (2) disadvantages of using a perpetual inventory system.
(4 Marks)

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QUESTION 3 (25 MARKS: 45 MINUTES)

A. The bank statement for Meranti Development Bhd shows a balance per bank of
RM38,682.10 on 31 May 2021. On this date the balance of cash per book is
RM34,496.90. A comparison of the bank statement with the general ledger cash
account, No. 101 reveals the following:

a) The amount of RM4,464.80 has been deposited to bank on 31 May 2021 which
was received by bank on 1 June 2021.
b) Outstanding checks identified: No. 321: RM4,410, No. 330: RM2,802.60 and No.
375: RM2,367.
c) Mr. Zubair, the account executive, wrote a check no.123 for RM1,505 and the
bank correctly paid the amount. However, Mr. Zubair recorded the check as
RM1,550.
d) There are a few bank memoranda received:
i. Debit memo – for the NSF check received from Chengal Jaya Enterprise for
RM1,052.60.
ii. Credit memo – collection of note receivable for RM2,020 plus interest
earned RM50.
iii. Credit memo – bank interest RM78.
iv. Debit memo – service charge RM70.
e) The rental expenses for the premises were made monthly for RM1,000 via
electronic transfer.
f) The 31 May 2021 cash receipts, RM2,750 were placed in the bank's night
depository after banking hours on that date and this amount did not appear on the
31 May 2021 bank statement.
g) A customer's note for RM1,800 was collected by the bank. A collection fee of
RM50 was deducted by the bank and the difference was deposited in the account.

REQUIRED:

Prepare a bank reconciliation statement for Meranti Development Bhd as of 31 May

2021.
(9 Marks)

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B. Following are transactions related to the accounts receivable of Jelutong Idaman Bhd
(JIB) during the first quarter ending 31 March 2021. JIB prepares interim financial
statements for every quarter.

8 January Sold goods for RM150,000 on credit. JIB uses the gross method in
recording accounts receivable. The term of the sale is 2/10, n/60.

14 January Collected RM50,000 from 8 January’s credit customers.

26 January Unexpectedly, a customer, Semarak Api Enterprise, whose account has

been written off in early 2021 paid RM8,000 for the total amount
owed.

30 January Assigned RM120,000 of accounts receivable from December 2020

sales to Merbau Bank Bhd (MBB), as security for a loan of
RM100,000. A commission of 4% on the face amount of the loan
was charged, and the note bears interest of 9% per year.

28 February Collected RM80,000 of accounts receivable assigned and remitted it

to MBB, along with one month’s interest.

31 March Data related to accounts receivable are as follows:

Accounts Receivable (RM) Estimated bad debts

Less than or equal to 30 days 120,000 4%
31 – 60 days 90,000 7%
61 – 90 days 50,000 10%
More than 90 days 20,000 15%

The allowance for bad debts had an unadjusted credit balance of

RM3,500.

REQUIRED:

(a) Prepare the journal entries for the above transactions in the book of Jelutong
Idaman Bhd.
(10 Marks)

(b) Prepare the adjusting entry (ies) on 31 March 2021 for Jelutong Idaman Bhd.

(4 Marks)

(c) Short-term receivables are shown at net realizable value. Briefly explain the
meaning of net realizable value and how it can be determined.
(2 Marks)

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QUESTION 4 (25 MARKS: 45 MINUTES)

A. Keruing Sejahtera Bhd (KERUING) is a company dealing with health food

products operating in Bukit Kayu Hitam, Kedah. The partial statement of financial
position of KERUING as at 31 December 2020 is as follows:

Current Liability RM
12% Notes payable 220,000
Interest payable 26,400
Premium liability 11,000
Accounts payable 180,000

437,400
Equity
Share capital (1,500,000 ordinary shares) 3,300,000
Retained earnings 1,400,000
4,700,000

Following are transactions related to equity and current liabilities that took place
during the first quarter 2021.

1 January Declared a dividend of RM0.20 for each share outstanding on 31

December 2020.

1 January KERUING settled 12% notes payable together with the total
interest that have not been paid in last year by signing a new
RM400,000, 8%, 5 year long term loan.

31 January Purchased a machine for RM40,000 paying RM10,000 in cash and

giving a one-year, 8% note for the balance.

21 February Received RM20,000 in advance for RM40,000 health product

ordered by Seraya Beauty Enterprise which to be delivered in
March and April.

5 March Delivered health product ordered on 21 February, worth RM15,000.

18 March Cash sales of RM55,000.

28 March Purchased goods from Syarikat Kempas Bhd for an invoice price of
RM60,000, terms 2/10, n/30, FOB shipping point. KERUING paid
freight costs of RM800. KERUING uses a periodic inventory
system and the gross method of accounting for purchase discounts.

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31 March Paid gross salaries of RM180,000 to employees. Deductions from

the salaries are as follows:

1. Employees’ contribution to EPF of 11% of the gross salary.

2. Zakat amounting to RM4,600.
3. Health insurance premium of RM8,400.
4. All payments to the respective departments are made on 25
April 2021.

REQUIRED:

(a) Prepare the journal entries to record the above transactions.

(13 Marks)

(b) Prepare the necessary adjusting entry(ies) at 31 March 2021.

(3 Marks)

(c) Prepare the liability section of Statement of Financial Position for KERUING
as at 31 March 2021.
(5 Marks)

B. Beauty products sold by Tradisi Berseri Bhd (TRADISI) are in boxes of RM10 per
box. TRADISI includes one coupon in each box sold. In return for 4 coupons,
customers receive a tote bag that the company purchases for RM2.20 each.
TRADISI's experience indicates that 60 percent of the coupons will be redeemed.
During 2020, 100,000 boxes of beauty products were sold, 12,000 tote bags were
purchased, and 40,000 coupons were redeemed. During the first quarter of 2021,
RM70,000 of beauty products were sold and 2,000 coupons were redeemed. The
coupons are valid for two (2) years.

REQUIRED:

(a) Prepare the journal entries in relation to the provision liability that
should be recorded by Tradisi Berseri Bhd in its first quarter of the year
2021.
(3 Marks)

(b) Determine the premium liability that should be reported by Tradisi Berseri
Bhd as at it first quarter of 2021.
(1 Mark)

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QUESTION 5 (15 MARKS: 27 MINUTES)

A. Keranji Tegar Bhd (KTB), an oil and gas company has 6,000,000 ordinary shares
with market value of RM2.55 per share as at 1 January 2020. On that date the equity
section also showed RM250,000,000 retained earnings balance and RM3,000,000
revaluation reserve balance.

The following transactions related to KTB during the year 2020:

1. On 11 January 2020, the company issued 250,000 ordinary shares at RM2.40

each payable in full on application. Actual applications for 400,000 ordinary
shares were received. Balloting was carried to select the successful applicants
and cash received from unsuccessful applicants were returned on 28 February
2020. Other cost paid were RM2,800 for underwriters' fees, RM4,000 for legal
fees and RM400 for printing.

2. On 30 September 2020, the company declared a 2% share dividend to existing

shareholders. The share dividend was distributed on the same date. The market
price of share was RM2.60.

3. On 31 December 2020, the company declared cash dividend of RM0.04 per

share to its shareholders.

Additional information:

1. Profit for the year 2020 was RM23,000,000.

2. For the year ended 2020, the company’s properties were revalued which
resulted in a gain of RM800,000.

Assume that the approval from all the relevant authorities has been obtained and
complied with for the above transactions.

REQUIRED:
(Round all figures to the nearest RM)

(a) Prepare the appropriate journal entries to record the above transactions.
(6 Marks)

(b) Prepare the Statement of Changes in Equity for Keranji Tegar Bhd for the year
ended 31 December 2020.

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(4 Marks)

(c) Explain the definition of treasury share based on Companies Act 2016.
(2 Marks)

(d) The amendment of Section 67A Companies Act 2016 allows a public company to
purchase its own shares. Explain the pre-requisite conditions that must be met for
share repurchase.
(3 Marks)

END OF QUESTIONS