CONFIDENTIAL 1 DEC2022/FAR570/TEST

UNIVERSITI TEKNOLOGI MARA

COMMON TEST

COURSE : FINANCIAL ACCOUNTING AND REPORTING 4

COURSE CODE : FAR570
EXAMINATION : DEC 2022
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

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

2. Answer ALL questions (handwritten). Start each answer on a new page.

3. Please check to make sure that this examination pack consists of:

i. The Question Paper

This examination paper consists of 4 printed pages

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QUESTION 1

Targaryen Bhd, one of the well-known listed companies which involves in food and beverages
industry in south peninsular of Malaysia. The following accounts were shown in its Statements
of Financial Position as at 31 December 2019:

Particulars RM
Equity and reserves
Issued ordinary shares at RM2 each 40,000,000
2% non-cumulative preference shares at RM1 each 200,000

Retained earnings 12,000,000

Liability
5% convertible loan stock at RM1 each 250,000

The following are the relevant information related to the accounts for the accounting period
ends 31 December 2020 and 2021.

i. On 1 July 2020, the company made a right issue of 1 share for every 4 shares held at
RM1.50. The fair value of the shares prior to the right issue is RM2.00.

ii. Additional 500,000 ordinary shares were issued on 1 May 2021.

iii. The 5% convertible loan stock may be converted using the conversion rate of 400
ordinary shares for every RM100 convertible loan stock.

iv. Profit after tax attributable to equity holders for the year ended 31 December 2020 and
2021 were RM1,500,000 and RM2,500,000 respectively.

v. The company paid preference shares dividend in arrears amounted to RM2000 in year
2020.

vi. Tax rate for each year was at 25%.

Required:

a. ‘Earnings per share (EPS) is a rough measurement of the amount of a company's profit
that can be allocated to one share of its common stock. Explain.
(5 marks)

b. Calculate the following information:

i. Basic earnings per share for the year ended 31 December 2020 and 31 December
2021 and

ii. Diluted earnings per share for the year ended 31 December 2021 and conclude your
findings based on your answer.
(15 marks)
(Total: 20 marks)

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QUESTION 2

Begonia Bhd, a public listed company based in Kuala Lumpur, manufactures a wide variety of
electrical goods for industrial kitchen. As a good practice, it is Begonia Bhd policy to maintains
a provision for warranty costs in relation to warranties given for electrical goods sold. As at 31
December 2021, the balance in the provision account were RM108,000. The following items
relate to the accounts of Begonia Bhd for the financial year ended 31 December 2021:

a. On 1 January 2020, Begonia Bhd acquired a machine for controlling the quality of
electric power. The machine was acquired for RM1,500,000. It is the company’s policy
to depreciate machine over useful life of 15 years. For income tax purpose, the machine
qualifies for an initial allowance of 20% and an annual allowance of 40%.

b. On 1 January 2021, the company acquired a new furniture for RM600,000. It is the
company’s policy to depreciate at 20% per annum. For income tax purpose, the furniture
qualifies for an initial allowance of 20% and annual allowance of 10%

c. As at 31 December 2021, the company’s account receivables amounting to RM300,000.

Begonia Bhd recognised allowance for doubtful debts of 1% every year.

d. During the year 2021, Begonia successfully enters development stage of a project for
its new technology. The development cost incurred for year 2021 was RM500,000.

e. As at 31 December 2021, the accrued salary expense was RM50,000. The related
salary expense has already been deducted for tax purpose.

f. The corporate tax rate is 24% for the year of assessment 2020 and 2021. Taxable profit
for the year 2021 was RM2,750,000. Taxable temporary difference at 1 January 2021
was RM400,000.

Required:

a) Compute the carrying amount and tax base of the machine and furniture for the year ended
31 December 2021.
(4 marks)

b) Compute the deferred tax asset or deferred tax liability as at 31 December 2021 arising
from the above transactions.

(7 marks)

c) Let say, in addition to the existing assets, as at 1 January 2021, Begonia Bhd has a
freehold land with a carrying amount of RM1 million. As at 31 December 2021, the land
was revalued to RM1.2 million. Assume the tax rate is 24%. The land has been held for
more than 5 years and the applicable RPGT rate is 10% if sold. Land is not qualify for
capital allowance. Determine the amount of deferred tax asset or liability of the freehold
land (Justify your answer)
(5 marks)
(Total: 15 marks)

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QUESTION 3

Orchid Bhd involves in raising cow for supply of meat in Malaysia. In 2022, Orchid Bhd is trying
to expand its business to supply meat outside Malaysia. Therefore, it searches for different
markets to enter in order to sell meat for the expansion. Below is the relevant information for
the markets.

Market Sales price Transaction Transport

per kilo costs per kilo per kilo
(RM) (RM) (RM)
A 13 1 2
B 15 3 3
Required:

a. Assess the market that Orchid Bhd can choose to enter by considering the fair value as
per MFRS13 Fair Value Measurement.
(4 marks)

b. Compute the fair value of 100 kilo of meat based on market chosen in (a) above.
(1 mark)
(Total: 5 marks)

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