CONFIDENTIAL 1 AC/MAY2018/FAR270

UNIVERSITI TEKNOLOGI MARA

COMMON TEST

COURSE : FINANCIAL ACCOUNTING 4

COURSE CODE : FAR270

EXAMINATION : MAY 2018

TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of three (3) questions.

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

3. Do not bring any material 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

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

This examination paper consists of 4 printed pages
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CONFIDENTIAL 2 AC/MAY2018/FAR270

QUESTION 1

Beat Three Bhd is a multinational company located in Georgetown, Penang. It diversifies its
principal activities by making strategic investment in many types of business and investment
activities. The company closes its account on 31 March each year. The following information
relates to the company’s properties for the current year:

1. Homestay Property – NorthWing

Homestay Property - NorthWing located in Chandan Puteri had a cost of

RM30,000,000 as at 1 April 2017. The estimated useful life of the property is 30 years.
The property has been fully rented out, earning total rental income of RM800,000 per
month. At the same time, Beat Three Bhd also provides security and maintenance
services to the tenants of the homestay of RM200,000 per annum and had charged
the tenants of the homestay as fees.

Required:

a. Define investment property in accordance with MFRS 140 Investment Property.

(2 marks)

b. Determine whether Homestay Property - NorthWing can be recognised as an

item of investment property as at 1 April 2017 in the books of Beat Three Bhd.
Provide reasons for your answer according to MFRS 140.
(3 marks)

2. Apartment – WestWing

Apartment - WestWing, a 10-storey apartment in Kuala Kangsar. It was acquired on 3

April 2017 at a cost of RM60,000,000. Beat Three Bhd also incurred legal fees of
RM11,600,000, property transfer taxes of RM350,000 and administrative expenses of
RM200,000 in connection with the purchase of the apartment. The estimated useful life
of the apartment is 25 years. The apartment was rented out to various tenants under
operating leases in return for rental payments of RM2,000,000 per annum. It is the
policy of Beat Three Bhd to adopt the cost model for its investment properties. The fair
value of the apartment on 31 March 2018 was RM73,500,000.

Required:

a. State THREE (3) properties that are not considered as investment properties
according to MFRS 140 Investment Property.
(3 marks)

b. Discuss on the accounting treatment of the apartment – WestWing in the

financial statements of Beat Three Bhd for the year ended 31 March 2018 with
reference to MFRS 140 Investment Property.
(5 marks)

c. Prepare an extract of the statement of profit or loss for the year ended 31 March
2018.
(2 marks)
(Total: 15 marks)
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CONFIDENTIAL 3 AC/MAY2018/FAR270

QUESTION 2

A. Maisara Sarawak Layer Cake Sdn Bhd is a local company based in Kuching, Sarawak.
During the year ended 31 December 2017, Maisara Sarawak Layer Cake Sdn Bhd
claimed that they are one of the pioneers to produce Sarawak’s layer cake and the
company’s goodwill has reached a total amount of RM500,000. The goodwill arises
from attributes such as good market location, popularity, reputation and special
recipes. The company has, at the same time acquired customer lists from another
well-known company through a contract agreement which amounted to RM20,000 as
an expansion to increase sales by offering special discount if the customers purchase
more cakes from the company. The company expects to derive benefit from the
acquired list for 3 years, and it believes that these benefits will be spread evenly over
the 3 years.

Required:

a. List any two (2) examples of intangible asset in accordance with MFRS 138
Intangible Asset.
(2 marks)

b. Explain whether the goodwill and the customer lists above are items of intangible
asset according to MFRS138 Intangible Assets.
(4 marks)

c. Explain the accounting treatment of the customer list for the year ended 31
December 2017 in accordance with MFRS138 Intangible Assets.
(3 marks)

B. Anggun Bhd, a healthcare company, is developing a supplement for woman under

confinement. The expenditure incurred to 31 December 2017 was as follows:

Period from Expenditure RM

1/1/2017 – Feasibility study of the project 78,000
31/3/2017
1/4/2017 Testing on formula 62,000
1/6/2017 – Label design and promotional activities 84,500
31/7/2017
1/8/2017 Development of product 97,800
1/10/2017 Product patent registration 15,000
1/12/2017 Launch of the product 59,000

Included in the development of product cost was general and administrative overhead
amounting RM7,000 which was incurred prior to 15 August 2017, the date on which it
became clear that the product was technically viable. On 1 September 2017, the
directors were confident that the product was profitable. The product was launched in
the market on 1 December 2017.

Required:

a. Determine the cost of development that shall be capitalised as intangible assets

according to MFRS 138 Intangible Asset.

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CONFIDENTIAL 4 AC/MAY2018/FAR270

(2 marks)
b. Show the journal entries for the project costs during the year ended 31
December 2017.
(4 marks)
(Total: 15 marks)

QUESTION 3

Given below are FIVE (5) independent situations for the year ended 31 December 2017.

1. On 10 December 2017 Twenty Century Sdn Bhd sold a smartphone to a customer for
RM3,500 with a 30 days money back guarantee. Based on the company’s record,
some customers were not satisfied with the smartphones and have returned back the
smartphones to claim their money.

2. One of the services provided by Melody Music is piano course for all ages. The piano
course starts from 1 October 2017 to 30 September 2018. Currently the company has
1,000 students who paid RM1,800 for the whole course.

3. Silver Bhd holds 10,000 shares of Iron Bhd. On 3 April 2017, Iron Bhd declared a
dividend of RM0.20 per share which will be paid to its shareholders on 15 July 2017.

4. On 30 November 2017, Wing Build Sdn Bhd sold and delivered 20 units of LCD
television to a customer which includes installation and inspection services. Cost of
each LCD TV is RM5,500. However, due to some technical error, installation of 3 units
of LCD TV was put on hold until January 2018.

5. Miss Leenda, a singer has recorded an album with Modern Entertainment Sdn Bhd.
Under the terms of the agreement she will be paid a royalty of RM3.50 per album sold.
For the year ended 31 December 2017, 8,000 albums have been sold.

Required:

Explain the basis and timing of revenue recognition in the financial statements for the year
ended 31 December 2017 (include the amount of revenue to be recognised, if any) for each
of the above situations in accordance with MFRS118 Revenue.

(Total: 10 marks)

END OF QUESTION PAPER

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