a
i
Statement of Profit or Loss account for the period ending 30 June 2020
Particulars
Amount ($)
Revenue from Operations
$ 1,800,000.00
Total Income
$ 1,800,000.00
Expenses
Cost of Sales
$ 1,072,000.00
Administrative Cost
$
104,000.00
Distribution Cost
$
116,000.00
Marketing Cost
$
54,000.00
Finance Cost
$
40,000.00
Total Expenses
$ 1,386,000.00
Profit / (loss) before exceptional items and tax
$
414,000.00
Gain on Sale of Plant (working note 1)
$
20,000.00
Profit / (loss) before tax from operations
$
434,000.00
Note: 1. Transfer from general reserve of $16,000 is not included in the statement of profit or loss
account and statement of other comprehensive income for the period ending 30 june 2020.
2. Dividend Paid of $10,000 is also not debited as expense to the statement of profit or loss
account, because dividend is not an expense and it is paid to the owners of the company.
3. Upward Revaluation of Land during the year is other comprehensive income and it is included
in the statement of other comprehensive income for the period ended 30 June 2020.
Working Note: 1. Calculation of Gain on Sale of Plant
Particulars
Amount ($)
Sale Value of Plant
$
60,000.00
Less: Carrying value of plant sold
$
(40,000.00)
Gain on Sale of Plant
$
20,000.00
Statement of other comprehensive income for the period ended 30 June 2020.
Particulars
Amount ($)
Other comprehensive income not to be reclassified to profit or loss in
subsequent periods
Revaluation of Land (working note 1)
$
Other comprehensive income for the year
$
10,000.00
10,000.00
Note: 1. Revaluation of Land is part of other comprehensive income not to be reclassified to profit or loss
in subsequent period.
Working Note: 1. Calculation of Revaluation of Land for the period ending 30 June 2020
Particulars
Fair Value of Land
$ 170,000.00
Less: Carrying value of Land
$ 160,000.00
Revaluation of Land
$ 10,000.00
Revaluation of Land for the period ending 30 June 2020 = $10,000
ii
Amount ($)
iii
The tax consequence of a stock redemption to a shareholder varies in two different situations. If
stock redemption is equivalent for all the shareholders and the relative interest of the shareholder
remains the same, then such stock redemption is treated as a dividend in the hands of
shareholder. On the other hand, if the stake of shareholder reduces as a result of stock
redemption, such stock redemption shall be considered to be sale of shares for shreholder and
capital gain on such sale shall be taxed accordingly.
For the Corporation, if stock redemption is for cash then such redemption shall have no tax
impact for the company. However, if any asset is distributed on stock redemption, it shall be
assumed that the asset is sold at fair market value and thus capital gain on such sale shall be
taxed accordingly.
b.
The reason for change equity includes introduction of capital in the business, Profit for the year
and amount withdrawn from the business.
In the current year company has made profit of $84,925 which is good.
But there are other points to remember whether your business is growing or not.
He has to do some ratio analysis to identify whether all the ratios are performing well with the
industry average or not. To check the liquidity, profitability, solvancy position of the business.
Hence increasing equity is not the only reasont for business to check the buisiness is doing
great.
Q2
a
i
Biological asset:
 Biological Assets are living assets of any business such as trees , plants and
animals.
For examples

bearer plants such as Mango trees , non bearer plants such as agricultural
produce , Living stock such as sheep, goat.
BIOLOGICAL ASSET
✓ Definition
It is an Asset which is defined as Any Living Animal or Plant.
✓ Recognition
Initial Recognition shall be recognised at Fair Value less Cost to Sell (FVLCTS).
In exceptional cases, if Fairvalue cannot be determined, then Biological Asset shall be
recognised at COST.
✓ Measurement (Subsequent)
On the Reporting date, these Biological Assets needs to be recognised at FVLCTS as on that
date and any gain or loss from that shall be transferred to P or L A/c.
If Biological Asset is initially recognised at Cost, then Entity shall provide Depreciation on
BIOLOGICAL ASSET.
Example: Sheep, pigs, Cotton plant, Cattle etc.,
AGRICULTURE PRODUCE:
✓ Definition
Agricultural Produce is Harvested product from Entity's Biological Asset.
✓ Recognition
When produce is harvested, it shall be recognised at FVLCTS As on Harvest Date.
Gain or Loss on initial recognition i.e, difference between cost and FVLCTS shall be recognised
in P or L .
✓ Measurement
At the reporting date, it shall be measured alike Inventory standard i.e, Cost (FVLCTS) or Net
Realisable Value (NRV) whichever is lower.
Gain or loss shall be transferred to P or L account.
Example: Milk, wheat, picked fruits etc.,
BEARER PLANTS
✓ Definition
These are Biological Assets, but treated as Bearer Plants, if the following 3 conditions are
satisfied:
I. Used for production or Supply of Agriculture produce.
II. It is expected to bear agriculture produce for more than 12 months.
III. There are remote chances of being sold.
Example: Coconut Tree, Mango Tree etc.,
✓ Recognition:
It has be recognised when it is
* Probable that future economic benefits will flow to the entity and
* Cost can be measured reliably.
Initial Recognition shall be recognised at Cost, including Borrowing cost, if eligible.
✓ Measurement
They can be measured under two alternatives:
* Cost model
* Revaluation model
Depreciation needs to be provided.
Under cost model,
Carrying amount= Original cost - accumulated depreciation - accumulated impairment loss
Under revaluation model,
Carrying amount = Fair value of Asset - Accumulated depreciation - accumulated Impairment
loss.
ii
b
Date
Particulars
Insurance Charges A/c
Prepaid Insurance A/c
( Insurance expired during the year, RM2,000.)
Debit
Credit
2000
2000
Allowance for doubtful Accounts
200
Accounts Receivable A/c
200
(Estimated bad debts, 5% of the accounts receivable,1800
already provided)
Depreciation A/c
9000
Accumulated depreciation –Equipment
9000
(Depreciation on equipment, 10% per year)(10500015000)*10%
Profit and Loss A/c
9000
Depreciation A/c
9000
(Charged to incone statement)
Interest On Note Receivable A/c
350
Interest Income A/c
350
(Interest at 5% is receivable on the note for one full year)
Prepaid Rent A/c
5400
Rent Expenses A/c
5400
(Rent paid in advance, RM5,400 (originally charged to
expense))
Salaries and wages Expense A/c
Salaries and wages Payable A/c
5800
5800
(Accrued salaries and wages at December 31, RM5,800)
Prepaid Advertising Charges A/c
560
Advertising Expense A/c
560
(Advertising paid in advance, RM560 (originally charged to
expense))
Amanah Berhad
Statement of Income for the year ending 31 December 2020
Particulars
Amount
Income
Revenue From Sales
260000
Other Income
Interest Income
350
Total
260350
Expenses
Cost of Goods Sold
111000
Salaries and Wages
55800
Advertising Expenses
4800
Depreciation and Amortization
9000
Rent expense
7400
Insurance Charges
2000
Provision for Bad debts
200
Total Expense
190200
Net Profit
70150
Amanah Berhad
Statement of Financial Position as at 31 December 2020
LIABILITIES
Equity and Share Capital
Share capital Ordinary
44000
Reserves and Surplus
Retained earnings
60360
Net Income for the year ended 31-December-2020
70150
Short term Liabilities
Provision for Doubtful debts at 31-December-2020
2000
Accumulated Depreciation
- Equipment
24000
Other Current Liabilities
Trades Payable
10800
Salaries and wages Payable A/c
5800
Total
217110
ASSETS
(I)Fixed Assets
(a) Tangible Assets
Equipment
105000
Other Non Current Assets
Notes Receivable
7000
Current Assets
Trade Receivable
40000
Inventory
44000
Cash and Cash equivalents
12000
Other Current Assets
Prepaid Insurance
2800
Interest On Note Receivable A/c
350
Prepaid Rent
5400
Prepaid Advertising Charges
560
Total
217110
Q3
i
Events occuring after the balance sheet date :If any significant or material events occured after the balance sheet date and before the
completion of annual general meeting. If those events are significant or material to the company
then all those events and its results will be informed to the shareholders by adjusting the
approved financial statements and those adjusted financial statements will be made available to
the shareholders and members of the company during the annual general meeting.
In the given case, there are few events occurred after approval of the financial statements. Those
are
1. A customer became bankrupt, from whom the company has to get 40,000. The company has
15000 provision for doubtful debts. The net loss for company is 25000. As the 25000 is
significant to the company. The management has to specify this event through adjusting financial
statements.
The event 1 has to be adjusted in the financial statements.
2. in the event 2 :- a fire occurewd in the company branch and it resulted to loss of 80,000. as the
loss of 80000 is significant to the company. the company has to disclose this event in the
financial statements by adjusting it.
The event 2 has to be adjusted in the financial statements.
3. in the event 3:- prices of investmnets was down by 40000. as the investment value decreases
based on the market volatality, the decreases and increases in the value of investments are quite
common for the bussiness. but if the amount of 40000 is very much significant and material to
the organization then this event can be disclosed to the shareholders through adjusting the
financial statements.
4. in the event 4 :-our company has acquired 70% of shares of another company which resulted
that, a company has become subsidiary to our company and our company became holding
company to that comapny. Having a subsidiary company is a significant event. This event has to
be informed to the shareholders through adjusted financial statements.
The event 4 has to be adjusted in the financial statements.
5. distribution of profits to shareholders are a significant event and it has to be informed to the
shareholders through adjusted financial statements.
The event 5 has to be adjusted in the financial statements.
The most Probable damage to Pay = RM80,000
As it is most probable expense as per customer, the company should make the provision for
RM80,000 of claim
So, as per the MFRS Standards.
RM80,000 amount should Sid Berhad’s accountant include as the provision in the accounts for
the year ended.