BKAR2023
CONFIDENTIAL
MID SEM TAKE HOME EXAMINATION
SECOND SEMESTER SESSION 2019/2020
COURSE CODE / NAME : BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II
DATE
: 16 MAY 2020
TIME
: 10.00 AM – 2.00 PM (4 HOURS)
INSTRUCTIONS :
1. This examination paper contains THREE (3) questions in FOUR (4) printed pages excluding the
cover page.
2. Please answer ALL questions in the answer sheets.
3. The exam instructions that govern this examination can be found in a separate document, ’Take
Home Examination Instruction’.
MATRIC NO :
____________________________________
( in words )
( in numbers )
IDENTIFICATION CARD NO. :
LECTURER : ____________________________________________
GROUP :
TABLE NO. :
CONFIDENTIAL
BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II
QUESTION 1 (20 MARKS: 60 MINUTES)
Fisheries Bhd is a small listed company involves in fishing and selling fish to the public via retail
outlets. The company owns a building that was acquired in early September 2014 for
RM1,200,000, with an estimated useful life of 20 years. It also possesses two boats, with details
as below:


Mirabella Boat that was purchased for RM600,000 on 8 February 2015; and
Fleur Boat, a qualifying asset under MFRS 123 Borrowing Costs, constructed by
Fisheries Bhd from 1 March 2016 to 30 November 2016.
The company had the following outstanding loans as at 31 December 2016:
Bank
General loan:
TZ Bank
ZE Bank
Construction loan:
TZ Bank
Loan amount
(RM)
Interest
rate (%)
Date loan raised
Status of loan
400,000
12
1 January 2015
450,000
15
1 October 2015
Date loan settled:
25 July 2016
Ongoing
500,000
12
1 April 2016
Ongoing
Construction costs of the boat include:
Detail
Purchase of materials
Cost of labour
Other expenditures
Amount (RM)
570,000
240,000
270,000
Payment date
1 March 2016
5 June 2016
20 July 2016
On 31 December 2018, the financial year-end (FYE) of Fisheries Bhd, Mirabella Boat collided
with other boats in Blue Sea. The boat market value dropped to RM230,000, before taking into
account the expected selling cost of RM30,000. After the collusion, it is estimated that the net
present value from the use of the damaged boat is RM200,000 and an estimated net present value
from the sale of the damaged boat is RM10,000.
When finalising the accounts for the FYE 2018, the accountant received a memo from the
management that the building was revalued to RM1.5 million by Wembley Appraisal on 31
December 2018. Fisheries Bhd adopts the revaluation model to account for the building
subsequently. The estimated useful life of the building remains the same, and the company
transfers the accumulated other comprehensive income to retained earnings as the asset is used.
On the other hand, the accounting policy relating to boat remains unchanged and is as follows:
The boat is carried at cost less accumulated depreciation and accumulated impairment
losses. Depreciation is provided at 15% per annum on a straight-line basis.
1
BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II
The elements of the financial statements are fully recognised for a month if the transactions related
to those elements occur more than 14 days in the month.
REQUIRED:
(Round your answer to the whole number)
(a)
Calculate the interest to be capitalised for the construction of Fleur Boat. Prepare the
journal entries related to the interest capitalisation for the year 2016.
(7 Marks)
(b)
Calculate the recoverable amount and impairment loss for Mirabella Boat, if any, on 31
December 2018 and prepare the relevant journal entries, if any.
(3 Marks)
(c)
Prepare the necessary journal entries related to the revaluation of the building for the years
2018 and 2019.
(8 Marks)
(d)
After a few years of using Fleur Boat, the boat was repaired during the FYE 2019 at the
cost of RM50,000. The repair includes removing the old fibreglass skin with a new
fibreglass and painting of the peeling paint. Fisheries Bhd would obtain ‘future economic
benefits’ after the repair.
Explain the accounting treatment for the repair of the boat.
(2 Marks)
2
BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II
QUESTION 2 (10 MARKS: 30 MINUTES)
KitchenStore Bhd (KSB) is a kitchenware company operating in Kedah. The company is in the
process of preparing its annual financial statements for the year ended 31 December 2019. KSB
applies the Loss Method and the Allowance to Reduce Inventory to Net Realisable Value (NRV)
Account to record the write down of the inventory. The relevant inventory costs and market data
on 31 December 2019 is summarised in the schedule below:
Item
Plate
Bowl
Skillet
Quantity
2,000
1,500
800
Estimated
Selling Price
per unit (RM)
Cost per
Unit (RM)
6.70
8.30
70.00
4.00
5.20
86.00
Completion and
Selling Cost per
unit (RM)
1.20
0.70
11.00
REQUIRED:
(a)
Calculate the LCNRV using the “individual-item” approach and determine the final
amount of inventory. Prepare the relevant journal entry required as at 31 December 2019.
(5 Marks)
(b)
Referring to the (a) question, determine the amount of gain or loss that would be recorded
by KSB if there is a credit balance of RM15,150 in the Allowance to Reduce Inventory to
NRV Account. Show the related journal entry.
(3 Marks)
(c)
Explain how the estimations of the Net Realization Value (NRV) are made according to
MFRS 102 Inventories, Para 30.
(2 Marks)
3
BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II
QUESTION 3 (10 MARKS: 30 MINUTES)
On 1 January 2018, MM Bhd acquired a fast food franchise for RM300,000. The legal life of the
franchise is seven (7) years while the economic useful life is six (6) years. On 31 December 2018,
the franchise was revalued at RM340,000. Due to the outbreak of the COVID-19 at the end of year
2019, sale of fast food from the franchise is declining. Impairment test conducted showed that the
fair value of the franchise was RM250,000. At this date the current trend of the outbreak indicates
further sale declining in the next six (6) months. The company adopts the revaluation model to
record the franchise.
The company also has legal title to a soft drink brand which was acquired on 1 January 2019 at
RM350,000. The brand product is expected to generate cash inflow indefintitely. However, there
is no active market available for this type of soft drink. On 31 December 2019, impairment test
conducted showed the recoverable amount of the brand was RM310,000.
Financial year end for the company is 31 December.
REQUIRED:
(a)
Prepare journal entries to record the accounting treatment related to the franchise of MM
Bhd on 31 December 2018 and 31 December 2019.
(8 Marks)
(b)
Explain the accounting treatment for the soft drink brand of MM Bhd on 31 December
2019.
(2 Marks)
END OF QUESTIONS
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