Assignment
Question 1 (Total: 30 marks)
The following are the statements of financial position (balance sheet) of Prominent Sdn Bhd
as at 30 September 2021 and 30 September 2022.
30 Sept 2021 30 Sept 2022
RM
RM
ASSETS
Non-current assets
Property, plant and equipment at cost
173,000
165,000
Less Accumulated depreciation
(46,000)
(52,000)
Property, plant and equipment (Net)
127,000
113,000
Total non-current assets
127,000
113,000
Current assets
Inventory
48,400
56,700
Trade receivables
37,400
34,800
Cash and bank
8,600
17,300
Total current assets
94,400
108,800
Total assets
221,400
221,800
EQUITY AND LIABILITIES
Equity
Share capital
General reserve
Retained earnings
Total equity
Non-current liabilities
Bank Loan (10%)
Total non-current liabilities
Current liabilities
Trade payables
Current tax payable
Total current liabilities
Total liabilities
Total equity and liabilities
68,000
6,400
47,900
122,300
86,000
9,600
54,900
150,500
52,000
52,000
20,000
20,000
31,400
15,700
47,100
99,100
221,400
32,800
18,500
51,300
71,300
221,800
Additional information
1. Non-current assets that cost RM8,000 and had a written down value (i.e., cost less
accumulated depreciation) of RM4,200 were disposed of during the year ended 30
September 2022 at a price of RM3,500. There were no other acquisitions or disposals of
non-current assets during the year.
2. Total depreciation on non-current assets for the year ended 30 September 2022 was
RM9,800.
3. Trade receivables are made up of the following:
Trade receivables
30
Sept 30
Sept
2021
2022
RM
RM
39,100
36,200
2
Less Provision for bad (1,700)
debts
Net trade receivables
37,400
(1,400)
34,800
4. The current tax payable at 30 September 2021 was paid in May 2022.
5. The proposed dividend for the year 30 September 2023 is RM29,600 and the proposed
dividend for the year 30 September 2022 was RM34,800. If approved at the annual
general meeting (AGM), the dividend is paid for immediately. The AGM is usually held
three months after the reporting period end date (i.e., 30 September).
6. During the year, 10,000 shares were issued at RM1.80 per share.
7. Profit before interest and taxes for the year ended 30 September 2022 is RM65,500.
Required:
a) Your task is to prepare a Statement of Cash flows for the year ended 30 September 2022.
20 marks
b) Explain why profit should be reconciled to net operating cash flows. Give examples from
this question to explain your answer.
10 marks
Question 2 (Total: 35 marks)
Prominent Sdn Bhd produces furniture at several factories. Its Seberang Prai factory
produces office chairs. Management aims to increase production in the coming year to 800
units per month. Therefore, management is exploring two production strategies for the
coming year. The first strategy is to continue operations with the existing machine, Machine
A, and the second strategy is to rent a new machine, Machine B, to produce the office chairs.
The monthly rental of Machine B is RM14,000. Machine B takes half an hour to produce one
office chair. However, it requires a more skilled labour force with an hourly rate of RM30 per
hour.
Comparatively, continuing to use Machine A means that costs will remain the same. Machine
A is 5 years old and is operating below capacity. The hourly labour rate is RM20 and the
materials required for each unit is RM30. Each office chair is assembled within an hour. Each
unit of the finished office chair is sold for RM120.The fixed monthly running costs of the
factory is RM21,000.
Required:
a) Your task is to calculate break-even point in units, break-even point in RM (round to the
nearest RM), unit contribution margin for each strategy.
10 marks
b) For each strategy, what is the profit that can be generated at the target production level
of 800 units?
5 marks
c) For each strategy, calculate the margin of safety in units and as a percentage of expected
sales volume.
5 marks
3
d) Which strategy will you recommend to management? Why?
recommendation with reference to your assessment of the strategies.
Note: State all relevant formulas in your assessment of the strategies.
4
Explain your
15 marks
Question 3 (Total: 35 marks)
Prominent Sdn Bhd invested in two projects, project Alpha and project Beta. The projects are
independent of each other. The following schedule shows the cash flows for each project.
Year
0
1
2
3
4
5
Project Alpha
-10,000
5,000
4,000
2,000
2,000
1,000
Project Beta
-10,000
1,000
2,000
2,000
3,000
6,000
The following schedule shows the profit for each project.
Year
0
1
2
3
4
5
Project Alpha
0
2,000
2,000
2,000
2,000
2,000
Project Beta
0
1,000
1,000
2,000
2,000
4,000
The discount rate is 10%.
Required:
a) Appraise the projects using the Accounting Rate of Return.
5 marks
b) Appraise the projects using the Payback Period.
5 marks
c) Appraise the projects using the Net Present Value.
10 marks
d) If the projects are mutually exclusive, which project should Prestigious Sdn Bhd invest
in? Explain your recommendation with reference to the above appraisal methods. 15
marks
Note: State all relevant formulas in your appraisal.
END OF ASSIGNMENT
5