QUESTION 1

GreenTech Bhd is a manufacturer of eco-friendly electrical appliances. The following trial

balance was extracted from the company’s books as at 31 December 2016.

DEBIT CREDIT Info no

RM’000 RM’000
Ordinary share capital @RM1 75,000
Non-cumulative preference share capital 15,000
Preference dividend paid 1,440
Retained profit as at 1 January 2016 46,400 1
Asset revaluation reserve 2,800 1
Revenue 388,160
Cost of sales 104,110 4
Administrative expenses 41,000
Distribution cost 20,233
Interest expenses 1,002
Tax recoverable DTA 5
1,050
Tax paid 19,800 5
Land at valuation on 1 January 2016 156,000 1
Building at valuation on 1 January 2016 72,000 1
Plant and machinery 35,000 3
Accumulated depreciation at 1 January 2016: 1
Building 5,400 1
Plant and machinery 17,500
Investment property 55,500 2
Intangible asset 7,800
Inventory as at 31 December 2016 18,650 4
Accounts receivables/payables 44,600 52,500
Bank 36,100
8% loan 10,000
Deferred taxation DTL 1,525 5
614,285 614,285

The following additional information have not been accounted for by the company.

1. On 1 January 2016, land and building were revalued at their fair value of
RM152,700,000 and RM70,300,000 respectively. The land and building were previously
revalued resulting in a surplus of RM2,800,000 and a deficit of RM100,000 respectively.
The building was acquired on 1 January 2013 with an estimated useful life of 40 years.

Previous year Current year fv-cv baki

Land +S 2,800 oci -2800 D 3300 sopl d500 sopl
oci=0
building -D 100 sopl +100 S 3700 oci s3600 oci
sopl=0
 It is the company’s policy to make an annual transfer from revaluation reserve to
retained profits in respect of the realisation of revaluation surplus. Ignore deferred tax on
revaluation.

2. The fair value of the investment property on 31 December 2016 was RM52,800,000 and
the company adopted the fair value model for the investment property.

3. On 1 January 2016, GreenTech Bhd sold its plant and machinery to ARA Finance Bhd at
its fair value of RM20,000,000. GreenTech Bhd immediately leased back the plant and
machinery for another 4 years at an annual rental of RM5,250,000 per annum payable
on 31 December each year. The interest on the lease is to be allocated over the lease
term using the sum of digits method. The plant and machinery was bought 4 years ago
with an estimated useful life of 8 years. GreenTech Bhd shall obtain ownership at the
end of the lease period.

Gain on disposal ( treat as deffered gain due to leaseback), need to amortised (2500/4 lease
term)=625
2500 prepaid revenue=liabilities
Treatment similar to government grant

Year 1 625 revenue in sopl in current year

2 625 current liability
3 625 non current liability
4 625 non current liability

4. The net realisable value of the closing inventory as at 31 December 2016 was
RM18,000,000.

5. The tax charge (sopl) for the year is estimated to be RM21,975,000 excluding the
transfer to deferred tax. The deferred tax liability at 31 December 2016 is RM1,850,000.

Required:

Prepare the following statements in a form suitable for publication and in compliance with the
relevant financial reporting standards:

a. Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2016 (Disclosure of Basic Earnings per share is required).
(10 marks)

b. Statement of Changes in Equity for the year ended 31 December 2016.

(5 marks)

c. Statement of Financial Position as at 31 December 2016. (Note on property, plant and

equipment is required).
(15 marks)
 (Total: 30 marks)

(a) GreenTech Bhd

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2016
  RM’000
Revenue/TURNOVER/SALES √388,160
Cost of sales [104,110+650 inventory]info 4 √√(104,760)
Gross Profit 283,400
Other Income  
Surplus on revaluation of building (derecognized deficit last year that was
√100**
written off RM100K) surplus related to deficit last year info 1
Amortisation deferred gain (SALES AND LEASEBACK) info 3
(35000000-17500000) CV √√625
20000000 FV )========>(2500/4)
OPERATING Expenses;  
Administrative expenses (w) √√√(47,900)
Selling and distribution expenses √(20,233)
Finance cost (w) √√(1,402)
Other Expenses:  
Deficit on revaluation of land (3300-2800ARR) info 1 √(500)*
Fair value loss: IP (55,500-52,800) info 2 √(2,700)
Profit before taxation 211,390
Taxation (21,975 + 325) bal b/d (DTL) – bal c/d (DTL) info 5 √√(22,300)
Profit for the year (AFTER TAX) socie 189,090
Other Comprehensive Income: TRANSFER TO SOCIE  
Surplus on revaluation of building info 1 √of 3,600 **
Deficit on revaluation of land info 1 √ of (2,800)*
  189,890
EPS RM2.50
Basic Earnings Per Share = RM2.50

BEPS= (PAT –PREF DIV)/NO ISSUED OSC

RM189,090,000 – 1,440,000√ 187,650,000

(w1) BEPS = ---------------------------------------= ------------------ = RM2.50

75,000,000osc√ 75,000,000

(√20 x ½ = 10 marks)

Workings:

  Admin Exp Finance Cost Selling and

 distribution
As per TB √41,000 √ 1,002 20233
Depn: Building
√of 1,900
(70,300/37) info 1  
Depn: P&M
√of 5,000  
(20,000/4) info 3
Interest Fin Lease
info 3
√ 400
[(5250x4)-
20000]x4/10  
 SOPL 47,900 1,402 20233

(b) GreenTech Bhd

Statement of Changes in the Equity for the year ended 31 December 2016
Ordinary Preferenc Ret.
  ARR
Share e Share Earnings
  RM’000 RM’000 RM’000 RM’000
Balance as at 1 Jan 2016-TB √75,000 √15,000 √2,800 √46,400
Profit for the year√-SOPL       189,090
Land: Rev’n deficit-OCI     √(2,800)*  
Building: Rev’n surplus-OCI     √3,600 **  
Preference dividend paid-TB       √(1,440)
Balance
ARR before
transfer to
RE
3600=(2800
-
2800+3600)
ARR Transfer to RE
    √of(97) √97
(3,600/37)-INFO 1 PARA 2
 Balance c/d -SOFP 75,000 15,000 3,503 234,147
(√10 x ½ = 5 marks)

(c) GreenTech Bhd

Statement of Financial Position as at 31 December 2016
Non-Current Assets: RM’000 RM’000
Property, plant and equipment√-INFO 1,3
  236,100
-REFER SCHEDULE
Investment property Info 2  √ 52,800
Intangible assets   √ 7,800
Current Assets:    
Inventory (18,650-650) at the lower of cost and net
√√18,000  
realizable value INFO 4
Accounts receivable √ 44,600  
Bank (36,100 + 20,000SP -5,250 lease paid) INFO 3 √√50,850 113,450
     410,150
Equity:    

Share Capital (OSC+PSC) 90,000

 
Retained Earnings √  234,147
Other reserves:ARR   3,503
Non-Current Liabilities:    
Leaseback Deferred gain (2,500-625-625) Info 3  √√1,250
Finance lease creditor –refer schedule   √√10,200
8% loan   √10,000
Deferred tax liability- info 5   √1,850
Current Liabilities    
Leaseback Deferred gain  Info 3 √ 625
Accounts payable   √ 52,500
Finance lease creditor [5250-(3/10x1000)]refer schedule   √4,950
Tax payable- info 5   √1,125
    410,150

Tax payable

TB b/d Dta 1050000 TB b/d Dtl 1525000

TB Tax paid 19800000 INFO 5 Sopl (21975000+325000) 22,300,000
INFO 5 C/D Dtl 1850000
c/d (L-TAX PAYABLE) 1125000**

22700000 23825000

Leasing installment schedule

Finance charge

[(5250000X4)-
(20000000)]
Opening Outstandin Payment Closing
Year-end (a) SOD=4+3+2+1 g (a+b=c) (d) (c-d)

2000000 4/10 (5250000

31/12/16 0 X1000000=400000 20400000 ) 1515000

31/12/17 1515000 3/10 15450000 (5250000 1020000

0 X1000000=300000 ) 0

CL NCL
minus
 interest

1020000 2/10X1000000=20000 (5250000

31/12/18 0 0 10400000 ) 5150000

1/10X1000000=10000 (5250000
31/12/19 5150000 0 5250000 ) 0

 Note to Property, Plant & Equip Building

(Revaluatio
Land n P&M
(revaluatio + (Disposal+SALES
n) elimination &LEASEBACK+lease+  
of acc
depreciation)
depn)
COST/FV (RM’000) (RM’000) (RM’000)
Balance as at 1 Jan 2016 156,000 72,000 35,000  
Elimination of Acc Dept -  √(5,400)    
Surplus/(Deficit) on revalution √(3,300) ??√3,700    
Disposal     √(35,000)  
Acquisition: leased assets     √20,000  
Balance as at 30 December 2016 INFO 1 INFO 1 INFO 3
 
152,700 70,300 20,000

ACC. DEPRECIATION:        
Balance as at 1 Jan 2016   5,400 17,500  
LT@UL
Elimination of AD   √(5,400) √(17,500)
=WIS 
(20,000/
Charge for the year (70,300/37)   √√1,900 √√5,000
4)
Balance as at 30 December 2016 - 1,900 5,000  

=236,100
CARRYING VALUE SOFP +152,700 +68,400 +15,000
SOFP

(√30 x ½ = 15 marks)