SCHOOL OF BUSINESS

Discussion Questions
Subject : Principles of Financial Accounting
Code : ACC1014
Tutorial 11 : Internal Control

Chapter 11

Discussion Questions

1. Distinguish between a private company and a public company.

3. Explain the classification of redeemable preference shares in the statement of financial

position.

Exercise Questions

1. Hong Ann Sdn. Bhd. was incorporated in 2 January 2019. The following events occurred
in 2019.

Date
2 January 2019 The company issued 500,000 ordinary shares for cash at RM500,000.
1 March 2019 The company issued 100,000 redeemable preference shares worth
RM100,000 for cash. The redeemable preference shares carry a fixed
dividend of 5% of the amount shares. The shares must be redeemed
after 5 years.
1 July 2019 The company issued 200,000 8% non-redeemable preference shares of
RM200,000 for cash.

Required:
Prepare journal entries to record the above transactions.
SCHOOL OF BUSINESS

4. The statement of changes in equity and statement of financial position of Strong Fitness
Sdn. Bhd. are given as follows:

Strong Fitness Sdn. Bhd.

Statement of Changes in Equity for the year ended 31 December 2019
Preferenc
Ordinary e Retained
Shares Shares Earnings Total

RM RM RM RM
Beginning balance 3,500,000 2,000,000 2,500,000 8,000,000
Profit for the year - - 1,200,000 1,200,000
Preference dividend paid - - (100,000) (100,000)
Ordinary dividend paid - - (350,000) (350,000)
Ending balance 3,500,000 2,000,000 3,250,000 8,750,000

Strong Fitness Sdn. Bhd.

Statement of financial position as at 31 December 2019

RM

Share capital
Ordinary shares - 3,500,000 shares (no par value) 3,500,000
2,000,000 5% cumulative preference shares 2,000,000

Retained earnings 3,250,000

8,750,000

Total assets 14,941,000

Total liabilities (6,191,000)

8,750,000
Required:
(a) Calculate the basic earnings per share for 2019.
(b) Calculate the return on equity for 2019
SCHOOL OF BUSINESS

Problem Questions

1. Shareholders’ equity of Bengkel Huat Sdn. Bhd. as at 31 December 2018 were reported
as follows:

RM

Ordinary share capital (no par value) 5,600,000

Retained earnings 1,800,000

The following events occurred in relation to the shareholders’ equity of Bengkel Huat Sdn.
Bhd. over the years from 2019 to 2021 which were yet to be recorded.

2019
28 November Paid interim dividend amounted to RM54,000.
31 December The directors proposed a final of RM140,000 and it was approved at the
annual general meeting on 22 March 2020.
2020
22 March The final dividend was approved and paid out of retained profits.
30 May The company issued 1,600,000 ordinary shares for cash. These shares
were at a fair market price of RM1.20 each.
31 December The directors proposed a final of RM200,000 and it was approved at the
annual general meeting on 16 March 2021.
2021
16 March The final dividend was approved and paid out of retained earnings.

The profit for the year reported for the year 31 December 2019, 31 December 2020 and 31
December 2021 were RM540,000, RM1,000,000 and RM2,400,000 respectively.

Required:
(a) Prepare journal entries to record all events for the year 2019, 2020 and 2021.
(b) Prepare the statement of changes in equity for the year ended 31 December 2019, 2020
and 2021.
(c) Prepare extract statement of financial position relating to shareholders’ equity as at 31
December 2019, 2020 and 2021.
SCHOOL OF BUSINESS

4. The trial balance of Smart-One Solution Sdn. Bhd. as at 31 December 2019 is given
below.

Smart-One Solution Sdn. Bhd.

Trial Balance as at 31 December 2019

Debit Credit

RM RM

Accumulated depreciation:

Buildings 200,000

Furniture and fittings 160,000

Motor vehicles 40,000

Accounts payable 100,600

Accounts receivable 121,200

Administrative expenses 201,420

Staff salaries 201,000

Advertising expenses 61,400

Bank overdraft 61,400

Buildings 1,240,000

Debentures 800,000

Discount allowed 6,100

Discount received 6,040

Freight inwards 20,160

Freight outwards 18,120

Furniture and fittings at cost 320,000

SCHOOL OF BUSINESS

Income tax expenses 41,600

Interest expenses 20,280

Inventory as at 1 January 2019 480,000

Investment 400,000

Land at cost 800,000

Motor vehicles at cost 120,800

Other liabilities-short term 60,600

Prepaid insurance 20,000

Purchases 480,000

Purchases returns 4,000

Retained earnings 560,000

Revaluation reserve 60,800

Sales 1,061,200

Sales returns 4,160

Share capital 1,400,000

Tax payable 41,600

4,556,240 4,556,240

The following information and events are yet to be recorded by the company on 31
December 2019.
(1) Inventory as at 31 December 2019 amounting to RM530,000.
(2) Accrued expenses comprised of:

RM

Staff salaries - sales department 3,400

Interest expenses 30,000

(3) Prepaid insurance as at 31 December 2019 amounted to RM6,000.
SCHOOL OF BUSINESS

(4) Provision for depreciation for 2019:

Buildings – 5% on cost
Motor vehicles – 20% on cost
Furniture and fittings - 10% on cost
(5) Sales made on 28 December 2019 amounted to RM16,000.
(6) Interest income receivable from investment amounting to RM12,000.
(7) Staff salaries comprise:
RM

Sales department 105,000

Administrative department 96,000

(8) The directors declared a final year dividend of 20 sen per share on 6 January 2020. An
interim dividend of RM70,000 was paid on 28 October 2019 and it had been debited to
the retained earnings account.
(9) During the year, the company issued 60,000 bonus shares of RM1 each. The bonus
shares were issued out of the revaluation reserve.

Required:
(a) Prepare journal entries to record the relevant adjustment.
(b) Prepare a statement of profit or loss for the year ended 31 December 2019.
(c) Prepare a statement of changes in equity for the year ended 31 December 2019.
(d) Prepare a statement of financial position as at 31 December 2019.