FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II (PART A) ANSWER ALL QUESTIONS QUESTION 1 (40 MARKS) Kindex Berhad is a trading company with financial year ending every 31 December. The company is preparing their financial statements for the year ending 31 December 2018 and the following is Kindex Berhad’s Trial Balance as at that date. Kindex Berhad Trial Balance as at 31 December 2018 Debit (RM’000) 62,740 Property, plant and equipment Accumulated depreciation Investment property Intangible asset Inventories – 1 January 2018 Other Short-term Investments Trade Receivables Cash and cash equivalents Share capital Revaluation reserve Retained earnings – 1 January 2018 Long-term loans Short-term borrowings Trade payables Revenue Allowance for doubtful debt Purchase Administrative expenses Distribution expenses Finance cost Taxation expense Rental income Credit (RM’000) 7,520 2,780 3,780 81,970 2,760 66,320 34,650 40,050 1,197 81,135 33,090 46,090 51,310 331,080 50 229,472 34,360 64,350 3,630 1,540 3,170 591,522 591,522 Additional information: a. The company applies the following policies for its Property, Plant and Equipment and the current balance includes the followings: (i) The company treats all its owner-occupied building as property, plant and equipment and applies cost model with a straight-line method for all buildings’ depreciation. Depreciation is charged on monthly basis. 1 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II For buildings that are rented out entirely, it treats them as investment properties and applies fair value model. (ii) On 1 July 2018, a three-storey building that has been used as an office for the company’s marketing team is rented out to a third party at RM5,000 a month, for five years. The cost of the building was RM300,000 and its accumulated depreciation on 1 January 2018 was RM72,000. The building’s useful life is 50 years. On 31 December 2018, the fair value of the building was RM250,000. None of the transactions related to the above has been recorded. (iii) Included in the property, plant and equipment is an equipment that cost RM2,800,000 at the time it was purchased in January 2012. Its useful life is 25 years. For this equipment, the company applies revaluation model and it will be assessed for revaluation every five (5) years. The recent revaluation was recorded in December 2016 at the amount of RM1,260,000. It is the policy of the company to apply transfer of revaluation reserve for all its revalued equipment by usage. This equipment is the only equipment that the company owns. None of the transactions related to the above has been recorded for the financial year 2018. (iv) Depreciation for the financial year ending 31 December 2018 for property, plant and equipment other than the above in (ii) and (iii) have been charged and included in the accumulated depreciation account in the trial balance. b. The company received a grant worth RM6,000 on 15 December 2018. It was an incentive by the government for retraining a group of its employees. The three-month training started in December 2018 has a cost of RM10,000 a month. None of the transactions related to the above has been recorded. c. Included in the long term loans is a loan worth RM4,000,000 at 5% annual interest, granted by a local bank on 1 August 2018, for five-year period. Instalment for the month of December 2018 has not been paid yet and the related interest for the instalment was RM15,200. None of the transactions related to the above has been recorded. d. The intangible asset was capitalised from the cost of research and development made by the company between 2016 and 2017, recognised in December 2017. The asset that resulted from the research and development process will last for 60 years and it is the company’s policy to amortise the intangible assets over 10 years. No record has been made in relation to the amortisation for the financial year 2018. 2 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II e. Kindex Berhad is in the middle of a court case with Kinoyu Berhad. Kindex Berhad refused to accept a batch of goods delivered to it in January 2018 due to its misspecification. Consequently, Kinoyu Berhad is suing Kindex Berhad in August 2018 and asking for a compensation of RM3,000,000 for breaking their trade contract. At the end of December 2018, the lawyers that represent Kindex Berhad gives a 50-50 percent chance to win. f. Included in its administrative expenses is a scholarship amounted to RM12,000 for one of its employees who is currently pursuing his Master degree in a local university. Such monetary support by companies, at any amount, will be exempted by the government from income tax and thus will be deducted from the taxable income. The relevant deduction has been applied in the estimation of tax expense amount in the trial balance. g. Stocktake as at 31 December 2018 revealed inventory cost amount of RM80,600,000. However, one batch of the inventory was damaged and need to be repackaged. The cost of repackaging was RM5,000 to enable it to be sold at RM110,000. The cost for the batch was RM100,000. Required: (i) Show the necessary adjusting journal entries for the additional information in (a) to (d) above. (12 marks) (ii) Explain how Kindex Berhad should account for the court case in (e) and the government assistance in (f) above. (6 marks) (iii) Prepare Statement of Profit or Loss and Other Comprehensive Income for financial year ended 31 December 2018 for Kindex Berhad. (10 marks) (iv) Prepare Statement of Financial Position as at 31 December 2018 for Kindex Berhad. (12 marks) 3 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II (PART B) ANSWER ONLY THREE QUESTIONS. QUESTION 1 (20 MARKS) a. On 1 July 2017, Bartoli Berhad issued a 5 year term convertible bond at a face value of RM1,000 per note. The coupon interest rate was 6%, paid semi-annually on every 1 July and 31 December each year. Transaction cost incurred was RM10,000. When the bonds were issued, the prevailing market interest rate was 8%. The company measured this financial liability at amortised cost using effective interest method. Required: (i) Calculate the proceeds received from the issuance of the bonds and show the journal entry(s) to record the transaction(s). (4 marks) (ii) Show the amortised cost table for the convertible bond from the date of issuance until 31 December 2019. (3 marks) (iii) Show all related items of the convertible bonds in the Statement of Financial Position as at 31 December 2018. (3 marks) b. Olive Berhad is a producer of olive oil. Its main item of equipment is an oil filter machine, which was purchased on 1 October 2016. The oil filter machine has two components: the main body (cost RM60,000) which has a ten-year life, and oil distribution pipe (cost RM10,000) with a five-year life. Olive Berhad received a government grant of RM12,000 that meant to cover the cost of only the main body of the oil filter machine. The grant came with the condition that no pollution should be the result of the company’s operation. In early 2018, Jabatan Alam Sekitar discovered that the manufacturing process produces solid waste, which polluted the nearby river. Due to this, the grant is now repayable in full. Olive Berhad’s financial year ends every 30 September. Required: (i) Show the journal entries to record the repayment of the grant using income approach (deferred income) and capital approach (write-off against asset). (4 marks) (ii) Show the presentation of the government grant in the Statement of Financial Position of Olive Berhad as at 30 September 2018 and relevant disclosure in relation to the grant as at that date if it were to use income approach. (6 marks) 4 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II QUESTION 2 (20 MARKS) a. Explain the differences between cost model and revaluation model (4 marks) b. Explain the guidelines given by the standards for companies that choose to apply revaluation model and the accounting treatments for subsequent recognition as well as derecognition of the asset under such model. (6 marks) c. General Optic Corporations operates a factory in China. Due to significant decline in demand for the manufactured product from the factory, an impairment test for the factory is deemed to be appropriate. Management has acquired the following information for the factory as at 31 December 2017: Cost – bought 1 January 2014 with useful life of 10 years Fair Value Less Cost of Sell Estimated undiscounted sum of net future cash flow (for 3 years at a discount rate of 8%) RM ‘000 32,500 10,000 15,000 Required: Explain how General Optic Corporations should account for the impairment of the factory. In your explanation, show all necessary calculations and journal entries. (10 marks) 5 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II QUESTION 3 (20 MARKS) a. Explain the accounting treatment for a change in accounting policy and change in accounting estimates with reference to MFRS 108 Accounting policies, Changes in Estimates and Errors. (7 marks) b. Silver Berhad is in the process of finalising the financial statements for the year ended 31 December 2018 and came across the following issues. Its profit after tax before the following adjustments is RM 1.65 million. The authorisation date for the financial statements is 31 March 2019. (i) The tax rate applicable to the company has been changed from 26% to 25% on 15 January 2019. This new rate is announced to be applied starting for financial year 2019. (ii) Major fire broke out in one of its factory on 15 February 2019 and destroyed the inventory valuing RM50,000, the sale value of which is now nil. (iii) A debtor that owes the company RM30,000 was declared bankrupt by the Insolvency Department on 6 January 2019. (iv) The fair value of investment property held by the company at the reporting date was RM1.2 million. However, a major flood on 5 January 2019 has been affecting the value of this investment property. On 28 March 2019, an independent property valuer estimated that the fair value now has decreased to RM900,000. (v) On 16 January 2019, the company issued 150,000 ordinary shares worth RM2.00 each following a successful public share offer. (vi) On 17 January 2019, the company received an invoice worth RM45,000 for the maintenance services provided by one of the creditors up to 31 December 2018. (vii) On 1 February 2019, tenders were called for the provision of courier services to the company. A three year contract worth RM120,000 was awarded to XYZ Express Bhd on 22 February 2019. Required: (i) For each case, discuss the accounting treatment with reference to MFRS 110 Events After the Reporting Period. (10 marks) (ii) Determine the amount profit of Silver Berhad for the year ended 31 December 2018. (3 marks) QUESTION 4 (20 MARKS) a. On 1 January 2017, Alor Bhd had 1,000,000 outstanding ordinary shares which had been originally issued at a price of RM3.50 per share. During the year, the company engaged in the following treasury share transactions: Date Transaction 6 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II 1 February 2017 Repurchased 100,000 units of its ordinary shares for RM3.30 per share. 3 March 2017 Reissued 6,000 units of the treasury share for RM3.50 per share. 5 May 2017 Reissued 3,000 shares of the treasury share for RM3.20 per share. 31 August 2017 Retired the remaining 1,000 units of treasury share. Required: Prepare journal entries to record the above transactions. (8 marks) b. The following account balances are related to Jalal Berhad as at 30 June 2018. Account RM’000 Contributed ordinary share capital 10% redeemable preference share capital Retained profits 600 240 135 The board of directors decides to redeem all preference shares at RM1 per share. For the purpose of redemption, the Directors are empowered to make fresh issue of ordinary shares at RM1 per share after utilising the retained profits. This is subject to the condition that a sum of RM30,000 shall be retained in the retained profits. Required: (i) Explain three factors that need to be considered for a preference shares to be classified as a liability. (3 marks) (ii) List the requirements of Section 72 of Company Act 2016 in relation to redemption of redeemable preference shares. (5 marks) (iii) Prepare the extract of Statement of Financial Position of Jalal Berhad immediately after the redemption. (4 marks) QUESTION 6 (20 MARKS) The core principle of MFRS 123 Borrowing Costs states that, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Required: 7 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ FINAL EXAMINATION (SEM 2:2017/2018) ACT3114: FINANCIAL ACCOUNTING AND REPORTING II Explain the guidelines given by the standards on the qualifying assets, the measurement and accounting treatment of borrowing costs in relation to the qualifying assets. Include example to help you with your explanation. (20 marks) - END OF QUESTIONS - 8 This study source was downloaded by 100000895434227 from CourseHero.com on 01-12-2025 16:35:30 GMT -06:00 https://www.coursehero.com/file/95018133/ACT-3114-FE-Set-A-15-Mei-2018-BI-revised-27-May-Zaidipdf/ Powered by TCPDF (www.tcpdf.org)
