CONFIDENTIAL 1 AC/FEB 2023/FAR160

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : FINANCIAL ACCOUNTING 2

COURSE CODE : FAR160
EXAMINATION : FEBRUARY 2023
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any materials into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) The Question Paper

ii) An Answer Booklet – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 8 printed pages
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QUESTION 1

A. When no partnership agreement exists, Section 26 of the Partnership Act 1961 lays
down several rules for determining the ordinary rights and duties of the partners.

Required:

State any FOUR (4) items stated in Section 26 Partnership Act 1961.
(4 marks)

B. Ami and Qila are partners in a partnership with sharing profit and losses of 3:2. They are
entitled to interest on beginning capital at 5% per annum, interest on drawings at 5% per
annum and salary of RM2,500 per month. On 1 January 2022, the account balances
were as follows:

Capital account (RM) Current account (RM)

Ami 102,000 (10,800)
Qila 75,000 13,200

1. On 31 October 2022, Ami retired from the partnership due to disagreement

between the partners. It was agreed that RM50,000 would be paid immediately by
cheque while the remaining balance would be paid by installment.

2. On 1 November 2022, Sara was admitted into the partnership with a capital
contribution of RM87,000 (which included premium on goodwill RM24,000).
Goodwill was not maintained in the books.

3. The new partnership agreement are as follows:

i. The profit-sharing ratio for Qila and Sara is 3:1 respectively.

ii. No interest on capital.
iii. Interest on drawings would be increased to 10% per annum.
iv. Each partner is entitled to a monthly salary of RM2,200 per month.

4. The Partners has revalued their assets as follows:

i. The value of building was increased by RM20,600.

ii. The values of motor vehicles and inventories were decreased by RM8,900
and RM16,200 respectively.
iii. Revaluation expenses amounting to RM3,200 was paid by cheque.

5. Drawings made by the partners during the year were as follows:

RM Date
Ami 7,200 1/1/2022
Qila 2,160 2/6/2022
Sara 1,200 1/12/2022

6. On 31 October 2022, Qila transferred RM15,000 of her capital account to the

partnership’s loan account. Interest on loan would be charged at 5% per annum
and treated as item of Statement of Profit or Loss. No record has been made yet.
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7. Net profit for the year ended 31 December 2022 was RM186,600. This amount
was assumed to be accrued evenly throughout the year.

Required:

a. Prepare goodwill account as at 31 October 2022.

(2 marks)

b. Prepare revaluation account as at 31 October 2022.

(2 marks)

c. Prepare the Appropriation Statement showing the pre and post period for the year
ended 31 December 2022.
(7 marks)

d. Prepare the Current Statement for Ami for the year ended 31 December 2022.
(3 marks)

e. Prepare the Capital Statement for Ami for the year ended 31 December 2022.
(2 marks)
(Total: 20 marks)

QUESTION 2

A. State TWO (2) differences between public company and private company
(4 marks)

B. The following is the Statement of Financial Position (extract) of Heritage Bhd as at 31

December 2021:

Heritage Bhd
Extract Statement of Financial Position as at 31 December 2021

RM
Issued and paid-up capital
90,000,000 Ordinary shares 180,000,000
40,000 8% Preference shares 70,000,000

Reserves
Retained earnings 146,000

For the financial year ending 31 December 2022, the company has decided to raise
additional capital using the following financial arrangements:

1. On 1 January 2022, the company decided to issue 7,000,000 units of ordinary

shares to the public at RM0.75 each and 1,500,000 units of 8% preference shares
at RM1.40 each. Both shares were payable in full on application.

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2. As the ordinary shares were oversubscribed by 2,000,000 units, excess

application money was refunded to the unsuccessful applicants. Applications
received for 8% preference shares were unsubscribed by 200,000 units.

3. On 1 November 2022, the company issued RM4,000,000 7% debentures at a

discount of 4%. The issuance cost incurred was RM13,000 and the effective
interest rate was assumed at 9%. The debenture interest was paid at the end of
the financial year on 31 December 2022. The debentures were carried at
amortised cost.

Required:

a. Show the journal entries to record the above transactions.

(10 marks)

b. Prepare the Statement of Financial Position (extract) as at 31 December 2022.

(2 marks)

c. Suggest TWO (2) advantages of issuing debentures over preference shares.

(4 marks)
(Total: 20 marks)

QUESTION 3

Suri Manis Bhd has been in the business of selling baking supplies for several years. The
reporting period of this company ends on 31 December each year.

As of 1 January 2022, the company reported its issued and paid-up capital that amounted to
RM7,500,000, made up of 4,000,000 units of ordinary shares of RM1.50 each and 750,000
6% preference shares of RM2.00 each.

Reported on the same date in the equity section were a balance of RM5,000,000 for retained
earnings account and RM300,000 of treasury shares account. The treasury shares were made
of 150,000 units of ordinary shares, bought from the open market.

On the same date, the non-current liability section showed a sum of RM2,000,000 that
consisted of RM600,000 for 5% debenture account and the remaining was 3% redeemable
preference shares of RM4.00 each.

On 1 March 2022, board of directors of Suri Manis Bhd decided to redeem 50% of the
redeemable preference shares partly using new issue of ordinary shares and partly out of
retained earnings account. A new issue of 400,000 units of ordinary shares was then offered
to the public at RM1.50 each. The issue was fully subscribed and paid for.

On 1 April 2022, the company sold 100,000 units of the treasury shares in the open market at
RM3.00 each.

The following day, a bonus issue was made to existing shareholders who held ordinary shares
as of 31 December 2021 using retained earnings. The basis of the bonus issue was one new
share for every fifty ordinary shares at RM2.00 each.
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At the end of May 2022, the company decided to redeem all of the 5% debentures at it carrying
value.

Required:

Prepare the relevant journal entries to record the above transactions. (Narrations are not
required).
(Total: 15 marks)

QUESTION 4

Amethyst Bhd trial balance as at 31 December 2022 is as follows:

Amethyst Bhd
Trial balance as at 31 December 2022
Debit (RM) Credit (RM)
Sales 1,475,000
Cost of sales 850,000
Auditors' fees 15,000
Directors' remuneration 120,000
Interest on bank loan 40,000
Tax paid 54,500
Accounts receivable and accounts payable 65,000 85,500
2,000,000 ordinary shares 4,000,000
1,500,000 7% preference shares 2,250,000
Insurance on properties 65,000
Advertising expenses 120,000
Retained earnings as at 1 January 2022 777,000
General reserves 500,000
Land and building (cost: RM5,000,000) 3,000,000
Plant and machinery (cost: RM3,500,000) 2,200,000
Motor vehicles (cost: RM1,000,000) 650,000
Investment 1,580,000
10% Bank loan 300,000
Income from investment 50,000
Inventories as at 31 December 2022 65,000
Interim preference share dividend 63,000
Interim ordinary share dividend 50,000
Bank 750,000
5% Debenture 250,000
9,687,500 9,687,500

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Additional information:

1. Depreciation expenses on the property, plant and equipment are as follows:

Land and building – RM100,000

Motor vehicles – RM80,000
Plant and machinery – RM50,500

The motor vehicles were used to deliver goods to customers.

2. Part of the interest on bank loan was paid in advance.

3. 1/4 of the advertising expenses was for January 2023.

4. The tax expense for the year was estimated at RM30,000.

5. During the annual general meeting, the board of directors unanimously decided on the
followings:

i. To transfer RM50,000 from retained earnings to general reserve.

ii. To pay the final preference dividend and declare a final 5% ordinary share
dividend.
iii. To offer 1 right share for every 10 shares held by the existing shareholders at
RM1.50 per unit.

(Show all workings and round up the calculation to the nearest RM)

Required:

Prepare the following statements in a form suitable for publication and in compliance with the
Companies Act 2016 and related Malaysian Financial Reporting Standards (MFRS):

a. Statement of Profit and Loss and Other Comprehensive Income for the year ended 31
December 2022.
(7 marks)
b. Statement of Changes in Equity for the year ended 31 December 2022
(4 marks)

c. Statement of Financial Position as at 31 December 2022.

(8 marks)

d. Notes to the financial statement for property, plants and equipment.

(6 marks)
(Total: 25 marks)

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QUESTION 5

Infinity Sdn Bhd operates in the semiconductor and related device manufacturing sector. The
following are the accounts balances of Infinity Sdn Bhd as at 31 December 2022.

RM
Direct factory expenses 613,000
Indirect factory expenses 118,750
Purchases of raw materials 1,864,500
Indirect materials 15,000
Sales 5,100,000
Factory maintenance 123,000
Repair of machinery 11,250
Inventory as at 1 January 2022:
Raw materials 482,500
Work in progress (production cost) 390,000
Finished goods 412,500
Direct factory wages 898,000
Indirect factory wages 234,000
Selling and Distribution expenses 140,875
Other administrative expenses 250,000
Utilities expenses 188,000
Allowance for unrealised profit as at 1 January 2022 37,500

Additional information:

1. Inventories as at 31 December 2022 were as follows:

RM
Raw materials 376,000
Work in progress (at production cost) 317,000
Finished goods 429,000

2. Utilities expenses of RM2,000 were still accrued as at 31 December 2022.

3. The company depreciated its plant and machinery at RM135,200 and equipment at
RM85,800.

4. The allocation of expenses is as follows:

Factory Office
Utilities expenses 60% 40%
Depreciation of equipment 50% 50%

5. The manufactured goods were to be transferred to the Statement of Profit or Loss at a

markup of 10% on the production cost of finished goods.

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Required:

a. Prepare the Manufacturing Account for the year ended 31 December 2022.
(10 marks)

b. Prepare the Statement of Profit or Loss for the year ended 31 December 2022.
(6 marks)

c. Explain briefly any TWO (2) Financial Reports prepared by non-profit organisation.
(4 marks)
(Total: 20 marks)

END OF QUESTION PAPER

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