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FAR210 TOPIC 5 TUTORIAL - MFRS 9 TRADE PAYABLES

QUESTION 1

Honey Bhd obtained a loan from a local bank, payable in equal installments over the
next five years.

Required:

a. Is the bank loan a financial liability?

b. Is the bank loan a non-current liability?

QUESTION 2

At the beginning of the year, Polo Bhd had an account payable amounted to
RM15,000. During the year Polo Bhd paid a quarter of the amount due.

Required:

a. Show the journal entries to record the above transaction and

b. State how much Polo Bhd would disclose its account payable in its statement of
financial position?

QUESTION 3

NM Bhd purchased merchandise inventory and agreed to pay its supplier RM8,000
within 30 days.

Required:

Is the supplier a liability to NM Bhd statement of financial position?

Pn.Azura Mohd.Noor
UiTM Perlis
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QUESTION 4

In January 2014, Murni started a business, Sri Buana Trading, which sells sports
equipment. The company purchased all inventories from suppliers on a cash and
credit basis. However, the business sells its products on a cash basis only. The trade
payable account is used for recording purchases of inventories only, while other
current liabilities are accrued in separate accounts.

On 12 August 2021, Sri Buana Trading purchases RM20,000 of merchandise on

account. Purchased terms were 2/10, n/30.

Required:

a. How much will the Sri Buana Trading have to pay for merchandise if it pays on
20 August 2021?
.
b. How much will the Sri Buana Trading have to pay for the merchandise if it pays
on 3 September 2021?

QUESTION 5

Cleans Sdn Bhd is a company concentrating on the office cleaning services in Kangar
Perlis. The company is established in 2014 and now the company has several
branches in Alor Setar, Sungai Petani and Seberang Perai. Due to aggressive
business expansion, the Board of Directors agreed to revise the business policy,
especially regarding the purchase of supplies. Normally, the company purchased
supplies from several suppliers elsewhere in Kuala Lumpur.

The selection of the suppliers is made by Miss Sham who the account executive of the
company is. In the month of July 2021, Miss Sham purchased stock of detergents and
office fragrances from three new suppliers.

Date Transactions

3 July 2021 AA SDN BHD

The selling price of the stock of detergents amounted to
RM1,200. However, AA Sdn Bhd agreed to give a trade
discount of 2%. The payment was made by cheque amounted
to RM800 and the remaining will be paid next month. AA Sdn
Bhd agreed to give a trade discount of 4% if the company is
willing to buy a stock of detergents regularly from the
company.

Pn.Azura Mohd.Noor
UiTM Perlis
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17 July 2021 WANGI SDN BHD

The total cost of purchase amounted to RM5,000. Telus Sdn
Bhd signing a 3-month, 12% note payable.
29 July 2021 MEKAR SDN BHD
The total cost of purchases incurred amounted to RM900. The
payment is made on the day of purchase.

Required:

a. The information provided by the reporting entity directly focus on the external
users of the financial report. Identify any two external users in which the financial
information provided are not directly to these users.

b. Based on the above scenario, identify whether there is an element of liability

exists in the book of account of Cleans Sdn Bhd on 31 July 2021?

c. State which companies could be recognized as financial liabilities to the Cleans

Sdn Bhd on 31 July 2021?. Indicate the classification of the element.

d. Provide justification that will support your choice in question (c)?

e. Show the journal entry for the transaction on 17 July 2021.

f. Prepare the Statement of Financial Position (extract) as at 31 July 2021 and

clearly state the value (in RM) the financial liability of Cleans Sdn Bhd.

g. When Cleans Sdn Bhd could derecognize the value stated in question (f) above?

QUESTION 6 (JUNE 2022)

Part A: True or False

1. Trade payable is recognized on the day the goods are received from supplier.
2. An entity shall not derecognize a financial liablity when the obligation specified
in the contract is discharged, cancelled or expires.
3. Prepaid insurance expense comes under Other Payables.
4. Discount received from supplier will decrease the amount of liability.
5. A note payable is also known as a loan or a promissory note.

Pn.Azura Mohd.Noor
UiTM Perlis
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Part B:

Rattan Art Furniture Bhd is a business selling various types of rattan furniture in
Malaysia. On 7 April 2022, Rattan Art Furniture Bhd ordered 30 units of rattan chairs
from Home Décor Bhd worth RM185,000 in total.

On 12 April 2022, Home Décor Bhd delivered rattan chairs to Rattan Art Furniture Bhd
with an invoice of credit term 2/15 net 30. A cheque amounted to RM15,000 was
issued by Rattan Art Furniture Bhd as a deposit and the balance will be paid later.

On 12 May 2022, Rattan Art Furniture Bhd made settlement of its debt to Home Décor
Bhd by cheque. The accounting year for the company ends on 30 April every year.

Required:

a. Does the transaction give rise to financial liablity? Explain.

b. When should the liability be recognized? Explain.

c. Prepare journal entries for the transaction on 12 April 2022.

d. Discuss whether Rattan Art Furniture Bhd should derecognize its financial liablity
on 30 April 2022.

e. Show an extract of Statement of Financial Position as at 30 April 2022 for Rattan

Art Furniture Bhd.

f. Prepare the journal entries if full settlement is made on 25 April 2022.

QUESTION 7 (JUNE 2023)

Part A: True or False

1. When the customer paid within 14 days then he is entitled to get a cash discount
in a credit term 2/14, net 45 from his supplier.
2. Discount allowed will increase the payables account.
3. Flowy Bhd sells goods to Caring Enterprise and a full settlement was made by
cheque. Flowy Bhd is a financial liablity to Caring Enterprise.
4. Financial liablities are best described as a contractual obligation to deliver cash
or another financial asset from another entity.
5. Accounts payable are long term debts that are due after one-year period.

Pn.Azura Mohd.Noor
UiTM Perlis
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Part B:

Alam Retro Furniture Bhd is a company selling custom-made furniture. The company
also provides services on repairing old furniture.

The company purchased different types of hardwoods used in furniture making from a
few suppliers. The purchases are made on a cash and credit basis. It is the company
policy to settle the credit purchases within one month of the date of purchase. The
payments will be made through direct debit via the business bank account.

The followings were the transactions for the month of July 2022:

Date Transactions
2/7/2022 Purchased rubber wood amounted to RM17,600 on credit from Resak
Enterprise. The credit term is 2/10, net 30. The company is entitled to
a trade discount of 2% on the gross amount.

9/7/2022 Returned some of the rubber wood to Resak Enterprise amounted to

RM600 due to the wrong specification.

12/7/2022 Purchased 3,000 kg of teak woods amounted to RM28,000 from

Chengal Sdn Bhd. Only 60% of the amount is paid by cheque and the
balance is to be paid 30 days from the date of purchase.

31/7/2022 Settled the amount owed to the Resak Enterprise by cheque.

Required:

a. Based on the above scenarion:

i. Indentify whether there is an element of liability exists in the books of Alam

Retro Furniture Bhd on 31 July 2022 and state which company could be
recognized as financial liability.

ii. Provide justification that will support your choice in question (a)(i) above?

iii. Show an extract of Statement of Financial Position as 31 July 2022 for

Alam Retro Furniture Bhd.

Pn.Azura Mohd.Noor
UiTM Perlis
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b. Based on the transaction between Alam Retro Furniture Bhd and Resak
Enterprise:

i. Record the journal entry for the transaction on 2 July 2022.

ii. What is implication on the account payable of Resak Enterprise in the

Alam Retro Furniture Bhd book of account when the transaction on 9 July
2022 occurs?

c. The derecognition of account payable of Resak Enterprise was made bu=y

cheque on 31 July 2022.

i. Compute the amount paid by Alam Retro Furniture Bhd to derecognize

the financial liablity.

ii. Show the journal entry to record the derecognition of this account payable.

Pn.Azura Mohd.Noor
UiTM Perlis