FINAL EXAMINATION

APRIL 2019 SEMESTER

COURSE : ADVANCED FINANCIAL ACCOUNTING

COURSE CODE : PAS 3113
DURATION : 3 HOURS
FACULTY : BUSINESS AND ACCOUNTANCY
PROGRAMME : BACHELOR OF ACCOUNTANCY (HONS)
LECTURER : MR MOHAMAD HAFIZ BIN HJ ROSLI
MADAM KASTINA BINTI YUSOF

INSTRUCTIONS TO CANDIDATES

This paper consists of one (1) section:

Section A – 5 questions (structured questions)

Answer all questions in Section A.

All answers of:

Section A must be answered in the answer booklet provided.

The answer for each question must start on a new page.

Candidates are allowed to use calculator.

Candidates are NOT ALLOWED to bring any unauthorized items into the exam hall
except with the permission of your invigilator.

Do Not Open the Question Paper Until Instructed

This Question Paper Consists of Eight (8) Printed Pages

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SECTION A (100 MARKS)

ANSWER ALL QUESTIONS.

QUESTION 1 (25 MARKS)

As at 31 December 2018, the statement of financial position of Alif Bhd. and Satar Bhd. are as
follows:

Alif Bhd Satar Bhd

RM’000 RM’000
Non-current assets
Land at cost 200,000 300,000
Plant and machinery 150,000 60,000
Accumulated depreciation (50,000) (20,000)
Investment in Satar Bhd 250,000 -

Current assets
Bank 31,400 38,000
Inventories 45,000 41,000
Trade receivables 28,000 32,000
Current account – Satar Bhd 12,000 -
Dividend receivable from Satar Bhd 9,600 -
676,000 451,000

Ordinary shares 400,000 200,000

7% preference shares 100,000 -
5.6 percent preference shares - 100,000
Retained profit 100,000 70,000

Current liabilities
Taxation 28,000 21,400
Current account – Alif Bhd - 11,000
Dividends payable 25,000 15,600
Trade payables 23,000 33,000
676,000 451,000

The following information is relevant:

1. Alif Bhd acquired 150 million of the 200 million issued ordinary shares of Satar Bhd on 1
January 2016 when the retained profit of Satar Bhd had a negative balance of RM20 million.

2. On 1 January 2016, the fair value of the land of Satar Bhd. was RM100 million more than
shown in the books. Satar Bhd did not adjust its books to reflect the new value. The piece of
land still remains with Satar Bhd.

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3. Non-controlling interest is measured at the proportionate share of the fair value of the net
assets of the subsidiary.

4. During the year ended 31 December 2018, Satar Bhd sold inventories valued at RM30
million to Alif Bhd. Satar Bhd invoices trading inventories to Alif Bhd at cost plus 50%. As
at 31 December 2018, Satar Bhd had sold half of these inventories.

5. During the year ended 31 December 2017, Alif Bhd sold to Satar Bhd plant and machinery
(cost RM40 million less accumulated depreciation RM20 million) at RM30 million. The
plant is depreciated using straight line method and the remaining economic life of this asset
is five years.

6. Alif’s bank has not credited its account for the RM1 million cash remitted by Satar Bhd on
31 December 2018.

7. Included in the trade receivables of Alif is RM200,000 due from Satar. However, Satar sent
RM100,000 on 30 December 2018, which Alif received on 3 January 2019.

8. Dividend payable of Satar Bhd include second-half years preference dividend.

9. Twenty percent of the partial goodwill was impaired by 31 December 2018.

Required:

Prepare the Consolidated Statement of Financial Position of Alif Bhd. as at 31 December 2018
(show necessary answer to calculate the amount of goodwill, non-controlling interest and group
retained profit).
(25 marks)

QUESTION 2 (20 MARKS)

Given below are the statements of profit or loss of three companies for the year ended 31
December 2018.

Statements of Profit or Loss for the year ended 31 December 2018

Hero Bhd Silver Bhd Super Bhd

RM’000 RM’000 RM’000
Turnover 310,000 190,000 142,500
Cost of sales (100,000) (80,000) (60,000)
Gross profit 210,000 110,000 82,500
Operating expenses (97,000) (30,000) (12,000)
Operating profit before tax 113,000 80,000 70,500
Service charges 5,000 - -
Dividend from Silver 7,500 - -

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Dividend from quoted investment 1,000 800 600

126,500 80,800 71,100
Taxation (40,000) (20,000) (15,000)
Profit for the year 86,500 60,800 56,100

Additional information:

1. Silver Bhd was incorporated on 1 January 2016 with 400 million ordinary shares and 200
million 10.5% cumulative preference shares.

2. On 1 January 2017, Hero acquired 300 million of the issued shares of Silver Bhd for RM500
million at which date there was a credit balance in the retained profit of Silver Bhd of RM30
million.

3. On 1 January 2018, Silver acquired 240 million of the 300 million ordinary shares of Super
Bhd for RM280 million.

4. The retained profit on 1 January 2018 and dividends for year 2018 were as follows:
Hero Silver Super
RM‘000 RM’000 RM’000
Retained profit as at 1 January 2018 50,000 40,000 15,000
Dividends paid:
Ordinary shares 20,000 10,000 6,000
Preference shares for half year only 10,500

5. Hero charges Silver Bhd for professional services rendered. These fees are included in the
statement of profit or loss of Hero Bhd and included in the operating expenses of Silver Bhd.

6. During the year 2018, Hero Bhd had made inter-company sales to Silver Bhd of RM12
million. The cost of the inventories were RM10 million and Silver Bhd has sold all of them.

7. Meanwhile, Super Bhd sold inventories at invoice price of RM7 million to Silver Bhd and
Super Bhd makes a profit of 40 percent on cost. Half of these goods were remain with Silver
Bhd as at 31 December 2018.

8. The groups recognizes partial goodwill and as at 31 December 2018, it was impaired by
RM10 million.

Required:

a. Prepare the statement of profit or loss of the group as at 31 December 2018.

(16 marks)

b. Compute the group’s retained profit as at 31 December 2018.

(4 marks)

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QUESTION 3 (20 MARKS)

The following are the Consolidated Statement of Profit or Loss and Comprehensive Income and
Part of Consolidated Statement of Financial Position prepared by Maju Bhd for the financial year
of 2018 and 2017.
Maju Group
Consolidated Statement of Profit or Loss and Comprehensive Income
For the year ended 31 December 2018
RM
Sales 8,092,500
Cost of sales (3,300,000)
Gross profit 4,792,500
Other income 75,000
Loss on sale of machine (30,000)
4,837,500
Administrative expenses (1,596,000)
Finance cost (12,000)
Other expenses (120,000)
Operating profit 3,109,500
Share of associated company’s profit 40,000
Profit before tax 3,149,500
Tax (944,850)
Profit after tax 2,204,650

Maju Group
Consolidated Statement of Financial Position (Partial) as at 31 December 2018
2018 2017
Non-Current Assets RM RM
Property, plant and equipment 5,212,000 4,800,000
Accumulated depreciation (1,950,000) (1,650,000)
Land 1,086,000 900,000
Investment in associate companies 70,000 50,000
Goodwill 180,000 210,000

Current Assets
Inventories 471,000 300,000
Account receivables 714,000 870,000
Cash 3,408,000 2,115,000
9,191,000 7,595,000
Non-current liabilities
Note payables 30,000 180,000

Current liabilities
Account payables 321,000 420,000
Tax payables 944,850 -
Total Liabilities 1,295,850 600,000

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Additional information:

1. On 1 September 2018, Maju Bhd acquired 100% equity interest of Uniq Sdn. Bhd for
RM675,000 cash. On the date of acquisition, the fair values of assets and liablilities of Uniq
Sdn Bhd were as follows:
RM
Property, plant and equipment (net) 570,000
Land 36,000
Inventories 66,000
Account receivables 39,000
Cash and cash equivalent 18,000
Notes payables 3,000
Account payables 51,000

2. A dividend of RM1,342,500 was paid by Maju Bhd during the year.

3. Profit before tax is computed after considering the following non-cash operating expenses:
Impairment of goodwill RM30,000
Depreciation expenses RM420,000
Share of associated company’s profit RM40,000

4. A piece of machine costing RM180,000 which had been depreciated RM120,000 was sold
for cash RM30,000. Maju also bought new machine on 31 October 2018 for cash. It is the
company’s policy to depreciate assets that acquired by company for more than six (6)
months, in any particular year.

5. During the year, Maju Bhd received subsidiary dividend of RM300,000.

6. In August 2018, another piece of land was acquired for cash. This land was revalued in
December 2018 and it was found to be undervalued by RM50,000 which was immediately
adjusted in company’s book record.

7. Maju Bhd also holds 20% interest in Danau Sdn. Bhd. The income statement (partial) of
Danau Sdn. Bhd. for the year ended 31 December 2018 is as follows:
Profit before tax RM200,000
Taxation RM60,000
Dividend distributed RM40,000

Required:

Based on the information provided, prepare the consolidated cash flow statement by using
indirect method for the year ended 31 December 2018.
(20 marks)

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QUESTION 4 (15 MARKS)

A. Jasa Setia Bhd has 500 employees who are paid RM80 per day in average. The employees
are each entitled to 6 working days of paid sick leave for each year. Unused sick leave may
be carried forward for one calendar year. Sick leave is taken first out of the current year’s
entitlement and then out of any balance brought forward from the previous year (a LIFO
basis). On 31 December 2018, the average entitlement is 2 days per employee. Jasa Setia Bhd
expects, based on past experience which expected to continue, that 400 employees will take
not more than 6 days of paid sick leave in 2019 and that the remaining 100 employees will
take an average 7 days each.

Required:

Discuss how much liability should be recognized by Jasa Setia Bhd at the end of 2018?

(5 marks)

B. The following scenarios have occurred in three different companies in year 2018.

Scenario 1
Rimbun Bhd has been established 10 years ago and its main activity is extracting and
producing fuel for import and domestic purposes. As its performance has increased
significantly for the last 10 years, effective from 1 January 2018 Rimbun Bhd has inserted a
new clause in its employment contract in which the company promises to pay its employee
bonus at least equal to 1 month salary in January the following year. Rimbun Bhd closes its
accounts on 31 December each year.

Scenario 2
Molek Bhd accounting period ends on 31 December each year. As a motivation to its
employees, Molek Bhd has announced to its employees that 1 month bonus will be paid in
January the following year (2019) if current year profit (2018) exceeds RM10 million.

Scenario 3
Rania Bhd issued 5,000 shares as consideration to purchase inventory from a supplier. The
inventory was purchased on 1 July 2018 and its fair value was RM52,000, whereas the
market value of the shares was RM10.50 per share on 1 July 2018.

Required:

a. Discuss the appropriate accounting treatment for the bonus of Scenario 1 and 2 in
accordance with MFRS 119 Employee Benefits.
(6 marks)

b. Describe the accounting treatment of the share based payment transaction of Scenario 3
in accordance with MFRS 2 Share- based Payments.
(4 marks)

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QUESTION 5 (20 MARKS)

A. Aspura Berhad is located in Malaysia but is a multinational company. It sources for materials
from Asian countries, manufactures the product and then exports them to Thailand for
assembly and reimports them into Malaysia and then sells them worldwide. All sales and
purchases are denominated in the US dollar. Its employees, however, are paid in the
Malaysian Ringgit. Aspura Berhad borrowed AUD8,000,000 from Southern Bank in
Australia on 1 July 2018. The loan is payable in full on 1 March 2019. Aspura Berhad’s
financial year ends on 31 December.

Required:

a. Determine the functional currency of Aspura Berhad.

(4 marks)

b. Explain how Aspura Berhad should recognize the loan and the treatment of the difference
on exchange.
(5 marks)

c. Discuss THREE (3) primary indicators to determine the functional currency based on
MFRS 121 The Effects of Changes in Foreign Exchange Rates.
(6 marks)

B. At the end of the financial year 31 December 2018, Razak IPC has inventory costing
NZD10,000 and the net realizable value is NZD8,000. Razak also has an investment property
of carrying amount NZD3million and the reporting date fair value was RM2.8 million. Razak
IPC functional currency is the Malaysian Ringgit. The exchange rate as at acquisition, 31
December 2017 and 31 December 2018 were at NZD0.30, NZD0.28 and NZD0.25
respectively for every RM1.

Required:

Discuss the accounting treatment of inventory and investment property in the consolidated
financial statement of Razak IPC.
(5 marks)

END OF QUESTION PAPER

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