AAT10503/TEST/FEB2022

ANSWER ALL QUESTIONS.

TOTAL MARKS: 50 MARKS

Part A: Short answer questions (20 marks)

Fill in the black with correct answer.

1. Explain the general purpose of financial reporting (2 marks)

2. Identify the appropriate qualitative characteristics for the following situations:

a) Information that can influence userss’ decision-making

b) Information that provides confirmation to users’ earlier expectations
c) Information that gives similar results despite using different measurement basis
(3 marks)
3. Explain how the elements of financial statements are the best described in each of the
following items:
a) Purchase a machine to be used in the production of goods amounting to
RM50,000. It is estimated that the useful life of the machine is 10 years.
b) Pay insurance premium in advance for a one-year coverage of RM3,600.
c) Pay wages to workers amounting to RM4,800.
d) Promise to pay supplier next month for the purchase of goods amounting to
RM8,000.
e) Receive interest of RM450 for the investment on debt securities
(5 marks)

4. Explain how the determination of carrying amount are differ using the historical cost,
fair value, value in use and current cost for an asset. (4 marks)

5. Explain two (3) external indicators of assets’ impairment (6 marks)

Part B: Multiple choice questions (10 marks)

Choose CORRECT answers.

1. According to MFRS 138, which of the following are considered as research activities?

A. The design and construction of chosen alternative products or processes

B. The design of pre-production prototypes
C. The design of possible new product
D. The design, construction and operation of a pilot plant

(2.5 marks)

2. Which of the following statements is TRUE in accordance with the revaluation of

depreciated assets under MFRS 116 Property, Plant and Equipment ?

A. The amount of depreciation for the year is based on the cost or valuation brought
forward if the revaluation incurs at the start of the year
AAT10503/TEST/FEB2022

B. The amount of depreciation for the year is based on the revalued amount
regardless when a revaluation has taken place
C. The amount of the surplus realised between the depreciation charged on the
revalued amount and the depreciation is transferred to profit or loss
D. The amount of the surplus realised between the depreciation charged on the
revalued amount and the depreciation is transferred to retained earnings

(2.5 marks)

3. Which of the following statements is TRUE in accordance to MFRS 136 Impairment

of Assets?
A. The recoverable amount of an asset is the higher of fair value and market value
B. The recoverable amount of an asset is the higher of fair value less costs of
disposal and market value
C. The recoverable amount of an asset is the higher of fair value less costs of
disposal and value in use
D. The recoverable amount of an asset is the higher of market value and value in
use
(2.5 marks)

4. Which are the following statement about inventory valuation for Statement of Financial
Position purposes are correct?

I. Average cost and FIFO are both acceptable methods of arriving at the cost of
inventories
II. Inventories of finished goods may be valued at labour and material costs only
III. Inventories should be valued at the lowest of cost, net realisable value and
replacement cost
IV. It is acceptable for inventories to be valued at selling price less estimated profit
margin

A. II and IV
B. I and III
C. II and III
D. I and IV
(2.5 marks)

Part C: Problem solving questions (20 marks)

Show all the related workings.

1. Seri Perdana Berhad bought a machinery on 1 January 2018 and paid a total of
RM474,520. The invoice showed as follows:

RM
Price 380, 000
Less: Trade discount 38,000
342,000
Small spare parts 14,600
Start-up and related pre-production costs 15,000
AAT10503/TEST/FEB2022

Estimated future cost of dismantling the machine when it could no 19,000

longer be used
Maintenance fee charge for one year from 1 January 2018 27,000
Installation costs 29,600
Delivery charge 6,800
Sales and Service Tax of 6% 20,520

a) State the assets constitute property, plant and equipment as prescribed by the MFRS
116: Property Plant Equipment
(3 marks)
b) In accordance with the MFRS 116 Property, Plant and Equipment, calculate the
acquisition cost of the machinery bought by the Seri Perdana Berhad.
(5 marks)
c) Show the journal entry to record the acquisition of the machinery assuming that the
payment is done by cash
(2 marks)
2. Pandora Berhad leases its building cost RM600,000 (1 January 2010) to Permata Sdn.
Bhd. with depreciation over 50 years. On 1 July 2019, the fair value of the building was
accessed at RM800,000. During the pandemic of covid in 2020, the assessor states that
the value of the building turned down to RM600,000 as at 30 June 2020.

a) Calculate the amount of the revaluation of the building and state the treatment for
depreciation from 2010 onwards.
(6 marks)
b) Show the double entry for the above revaluation and depreciation.

(4 marks)

3.

End of questions