CONFIDENTIAL 1 AC/APR 2022/FAR270

UNIVERSITI TEKNOLOGI MARA

COMMON TEST

COURSE : FINANCIAL ACCOUNTING 4

COURSE CODE : FAR270
EXAMINATION : APRIL 2022
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of TWO questions.

2. Answer the question in your own Answer Paper.

3. Write your FULL NAME, STUDENT ID and GROUP on top of the first page of your answer.

4. Please scan your answer and combine it into one single PDF file before submit.

5. Please rename your file with your FULL NAME_STUDENT ID_GROUP

6. Answer ALL questions in English.

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

This examination paper consists of 5 pages

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QUESTION 1

A. i. Sofiya is a new account clerk in Lovely Shawl Bhd. She only learned how to
prepare account during her secondary school. With her limited knowledge in
preparing account, she is afraid that she might recorded the asset transaction
wrongly.

She had shown you a list of expenses incurred during the acquisition of a cutting
machine. The machine was imported from Japan. She is unsure on how to
account for each of the expenses incurred.

You are advised to help her in this matter.

Required:

Identify whether the following expenses incurred can be capitalised or expense

off in accordance with MFRS 116 Property, Plant and Equipment.

1. Transportation cost from Japan to Malaysia

2. Duty import
3. Legal fees
4. Estimated repairing cost for each year
5. Employee training costs

(5 marks)

ii. Venture Bhd is a company involves in creating advertisement. Most of the

advertisements are made using a specialized computer with custom made
software.
On 1 July 2021, the company acquired a high- technology computer to deal with
high demand of technical and creativeness in the advertisement. The following
costs are related to the new computer:

RM
Computer 7,000
External hard disc 450
Custom made software 3,500
High tech speaker 2,450
Installation and testing 700
Transportation cost 200
Training cost 1,500
Maintenance cost (monthly) 150

It is the policy of Venture Bhd to depreciate its property, plant and equipment
based on the period of ownership over 5 years. The company adopts cost model
for its property, plant and equipment to measure its subsequent measurement.

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Required:

Calculate the initial cost of new computer on 1 July 2021.

(5 marks)

B. Menegak Bhd involves in making a sambal ngosek. The product is highly demanded in
the market at present. All units are sold out whenever it is available in the market. Thus,
the production of sambal ngosek becomes so intensive that the machine is fully utilized
every day. As at 1 July 2021, the company has in its account, machinery costing
RM2,700,000 with accumulated depreciation of RM1,350,000. In order to meet its
current demands, the company has been advised to buy a special component replacing
the existing component so that it will increase the output of the production and extend
the life of the machine.

The cost of the old component that need to be replaced is RM300,000, which was
bought on 1 July 2016. Meanwhile, the cost of the new component is RM500,000. This
replacement will take place on 1 July 2021.

It is the policy of the company to charge depreciation on straight line method using the
monthly basis. Depreciation rates for machinery is 10%. The company adopts cost
model for its subsequent measurement and the financial year end is on 30 June every
year.

Required:

i. Compute the carrying amount of the machinery as at 1 J u l y 2021 after the

replacement of the old component took place.
(4 marks)

ii. Prepare the journal entries for the transactions.

(4 marks)

C. Brilliant Vision Bhd, a successful company in a business selling stylish and branded
sunglasses acquired a building in Pahang at a cost of RM15,000,000 on 5 January
2018. It is the policy of the company to depreciate its building using the straight line
method on yearly basis. The estimated useful life of the building is 30 years.

The company also has a piece of land in Terengganu. This land had cost the company
RM3,000,000. The land was bought on 1 January 2018.

On 31 December 2019, the fair value of the building was determined to be

RM19,330,000, while the fair value of the land was RM2,800,000.

On 31 December 2021, the fair value of the land and building was RM5,000,000 and
RM22,000,000 respectively.

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The company adopts revaluation model for its property, plant and equipment. The
revaluation will be done on every two years of ownership. The transfer on revaluation
will only be made in full upon disposal. The company prepares its financial statement on
31 December every year.

Required:

i. Determine whether it is a surplus or deficit on revaluation of building on 31

December 2021 (round up the figure to the nearest RM).
(2 marks)

ii. Explain the accounting treatment for the revaluation of land on 31 December 2021.
(4 marks)

iii. Prepare journal entries on revaluation of land and building for the year ended 31
December 2021.
(6 marks)

D. On 1 January 2021, Sesuci Bhd have the following assets:

Cost (RM) Accumulated Depreciation (RM)

Land 1,000,000 Nil
Building 3,000,000 750,000

On 1 March 2021, the company purchased a delivery van for delivering its product to
customers. The company paid RM150,000 for the van.

The company has been planning to move its operation to another state in the country.
In order to fulfill this plan, it has decided to sell some of its assets which are the land
and building. This is to cover the cost of acquiring new assets at the new place.

On 1 June 2021, the whole land was disposed off at RM2,000,000. Meanwhile, part of
the building which cost RM1,200,000 had been sold for RM3,500,000. The land and
building were purchased on 1 January 2016.

It is the policy of the company to adopt the cost model to account for its property, plant
and equipment. The building is depreciated for 5% using the straight line method based
on a monthly basis. The delivery van is depreciated over its estimated useful life of 10
years with residual value of RM15,000 on a yearly basis.

Required:

Construct a schedule to show the movement of property, plant and equipment for the
year end 31 December 2021.
(5 marks)
(Total: 35 marks)

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QUESTION 2

A. LeeMang Properties Bhd has submitted a list of its properties (land and building) in Selangor
and Negeri Sembilan to you so that you can advise them whether the respective land and
buildings would be recognised as Investment Property according to MFRS 140 Investment
Property.

i. 20 acres of land in Selangor in which 80% is used for its operating activities and the
balance is rented out to outsiders under finance lease.

ii. A ten-storey building in Negeri Sembilan, whereby the whole building is leased out to
its subsidiary.

iii. A 25-storey building in Selangor, whereby two floors are used for office administration
and business purposes and the balance is rented out to outsiders under an operating
lease. The whole building cannot be sold separately.

iv. A piece of land in Negeri Sembilan, whereby 95% of it is rented out to outsiders under
operating lease and the balance is used as a site for its transportation facilities. The
company cannot account the portions separately.

v. A three-storey building in Negeri Sembilan is used as a warehouse for its inventory.

Required:

Identify whether the above properties would qualify as Investment Property according to the
definition of MFRS 140 Investment Property.
(5 marks)

B. LongTong Bhd acquired a mega shopping mall on 1 July 2011, which was rented out to
various other organisations under operating lease arrangements. The shopping mall has an
estimated life of 30 years and was measured at fair value. The trial balance as at 31
December 2020 showed the fair value of the shopping mall was RM8,000,000. The
company also provides the security and maintenance services at a total cost of
RM2,000,000 per year to their tenants. On 1 July 2021, this company converted the mall to
office purpose due to company’s rapid expansion program that demand in more office
space. On this date, the fair value of the building was determined to be RM10,000,000. The
company adopted the revaluation model for its owner occupied building and its depreciation
is calculated based on monthly basis. The fair value of the building on 31 December 2021
was RM12,000,000.

Required:

a. Prepare a Statement of Profit or Loss (extract) for the year ended 31 December 2021 and
Statement of Financial Position (extract) as at 31 December 2021.
(5 marks)

b. Explain the accounting treatment in relation to the above scenario as at 1 July 2021 and
31 December 2021.
(5 marks)
(Total: 15 marks)
END OF QUESTION PAPER
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