CONFIDENTIAL 4 SUGGESTED SOLUTION: FARS10 DECEMBER 2016 QUESTION 1 a. DB Manufacturing Bhd Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2016 RM'000 Revenue 632,300 Vv Cost of sales ___ (249,323) Gross Profit 382,977 Amortisation of deferred gain 100 Vv Other income 6,000 Vv Deficit on revaluation of buildings (W3) (3,000) ¥ Administration expenses (101,126) Selling and distribution expenses (191,700) Finance cost (1,985) Profit before tax 91,266 Taxation ___ (23,500) ¥ Profit after tax 67,766 Other comprehensive income 4,500 V Surplus on revaluation of land (W2) Deficit on revaluation of building (W3) (1,000) Vv ACIDEC 2016/FARS10 Total comprehensive income 68,266 EPS (67,766 — 250 / 50,090) RM1.35 WV Workings ‘Admin | Selling and | Finance | Cost of Expenses | Distribution | cost Sales Rm‘ooo | RM'000 | RM'000 |_RM'000 Balance as per trial balance 100,120V|__191,700V| _1,485¥ | _246,702V Depreciation: Buildings (W4) 1,000V0F Plant and machinery (W5) 2,507VOF Loss on foreign exchange (90 - 96) 6y Lease interest (W1) 500V Impairment in inventories 114V Total 101,126 191,700| 1,985 | 249,323 © Hak Cipta Universiti Teknologi MARA (V 20x %= 10 marks) CONFIDENTIAL2 CONFIDENTIAL, DB Manufacturing Bhd Statement Changes of Equity for the year ended 30 June 2016 RE osc Psc ARR 7 RM’000 wooo RM 009 ae Opening balance 50,000 13,000V 2,500 one Net profit after tax OCI -Land surplus 1.5004 -Deficit building (1,000) rsoy Dividend paid (250+500) Newissue of ordinary shares OV Closing balance 50,090 13,000 3,000 84,692 DB Manufacturing Bhd ‘Statement of Financial Position as at 30 June 2016 Non-current Assets Property, plant and equipment Investment property Intangible assets Current Assets Inventories (18,380 - 114) Trade and other receivables Bank (11,770 + 3,500 — 1,000) Equity Share Capital Other Reserves Retained earings Non-current Liabilties Long-term loan Deferred tax liability (7,484 - 300) Lease creditor (3,000 - 600) Deferred gain Current Liabilities Trade and other payables (4,798 + 96) Tax payable (23,500 + 300 - 22,000) Lease creditor (1,000 - 400) Deferred gain © Hak Cipta Universiti Teknologi MARA 180,360 ACIDEC 2016/FARS10 (10 x 1/2 = 5 marks) RM'000 95,431 24,600 V 18,784 Vv 18,266 WW 9,009 v 14,270 W 63,090 3,000 84,692 > 12,300 V 7.184 WH 2,400 V 300 ¥ 4894 V 1,800 W 600 W 400. V 180,360 CONFIDENTIALyo CONFIDENTIAL Note: Property, Plant and Equipment ACIDEC 2016/FARS10 Freehold land] Building | Plant & Mach Total RM‘000 RM'000 RM'000 RM’000 Cost/Valuation Balance as at 1 July 2015 46,970 | __ 45,000 22,980 | _ 114,950 Surplus on revaluation of land 4,500V 4,500 Deficit on revaluation of buildings (4,000), (4,000) Finance lease 3,500V 3,500 Elimination of AD (6,000)V (6,000) Disposal (6,000)V |__ (5,000) Acquisition (40,000 x 4.5) 180 180 Balance as at 30 June 2016 48,470 35,000 21,660 | 105,130 Accumulated Depreciation Balance as at 1 July 2015 0 5,000 g1ez| 14,192 Charge for the year | w4)1,000v | (w5)2.507W. 3,507 Elimination of AD (6,000) v (6,000) Disposal (2,000)¥ | __ (2,000) Balance as at 30 June 2016 0 0 9,699 9,699 Carrying Value 48,470 35,000 411,961| 95,434 engin (130 x % = 15 marks) (Total: 30 marks) wi Fair value of machine 3,500 MLP 1,000 x 5 yrs. 5,000 Finance charge 41500 n=5,SOD= 142+3+4s5 = 15 Revaluation of land (W2): Fair value b/d Fair value 30/6/2016 Surplus Revaluation of building (W3): Fair value 1/7/2015 Accumulated depreciation 30/6/16 Carrying value 30/6/16 Fair value 30/6/16 Deficit Lease interest 30/6/2016 46,970 48,470 4,500 45,000 (6,000) Depreciation of building (W4) (45,000 - 5,000) = 40,000/40 yrs = 4,000 Depreciat Leased machine New acquisition © Hak Cipta Universiti Teknologi MARA in: Existing P&M (W5) (22,980 - 5,000) = 17,980/10 yrs = (3,500/5 years) (180/10 x 6/12) 500 x 5/15 = 500 CONFIDENTIALCONFIDENTIAL om ‘ . ition : r : ” Qe ately, tl : ific . it cannot d n tos le be not (o Teknologh MARA CONFIDENTIALCONFIDENTIAL QUESTION 3 8 ACIDEC 2016/FARS10 a. The cost Research cost carats test conducted by the company is identified as research cost.” that the future Tecognized as an intangible asset’ since there is no probability Therefore, the ene ea that are attributable to the asset will flow to the ¥. j of : 4 year ended 30 June 2015. 150,000v is recognised as an expense in SOPL ¥ for the (“5x1 =5 marks) b, Project B'Power was rejected in June 2015 since it did not meet the market standard and might affect the company’s future sales. It did not meet the criteria of technically feasible in completing the intangible asset so that it will be available for use or salev’. No expected future economic benefit will flow to the entity”. Therefore the amount spent for development cost cannot be capitalised but recognised as an expense ¥ for the year ended 30 June 2015. For the year ended 30 June 2016, the development cost will only be capitalised “starting April 2016 when they succeded in improving the taste and quality of the drink, that is when there is probabale future economic benefit will flow to the entity.” (¥5x1=5 marks) RM Food chemist annual salary (150,000 x 3/12) 37,500¥ Lab assistants and employees salary (RM15,500x 3 months) 46,500 Ingredients, tasting and quality control 720,000V Total development cost that meets the criteria for capitalisation for the year ended 30 June 2016 804,000 However, the amount recognised as an intangible asset is limited to future economic benefit, which is RM800,000 v. The excess of RM4,000¥ (804,000 OF -800,000) cannot be recognised as an intangible asset, and must be write off to SOPL. (¥5x 1 =5 marks) d. Development cost 1,500,000 Amortisation (1,500,000/5 x 28/12) (700,000) 800,000 The product was withdrawn from the market on 1 May 2016. This implied that it is not able to generate future economic benefit to the company and can no longer be recognised as an intangible asset “because the recognition criteria are not met. The development cost will only be amortised up to 30 April 2016”. Therefore the unamortised balance” of the development cost amounting to RM800,000” shall be written off to the Statement of Profit or Loss vfor the year ended 30 June 2016. (¥5x1=5 marks) (Total: 20 marks) © Hak Cipta Universit! Teknologi MARA CONFIDENTIALACIDEC 2016/FAR510 CONFIDENTIAL QUESTION 4 picturesque Bhd led 30 June 2016 ‘lows for the year ena ee [_Rwro00 __| = ties: 10/5. [Gash rows Tom operating aides! SBD Profit before tax __ | 7, [Adjustments fe 360/ Finance cost 6 Depreciation ot Fair value loss on a; joss on reclassification to held for sale. 4353 ‘Changes in working capital: (2ar Increase in inventory (192) / Increase in trade receivables 3121 increase in trade payables 3,849 Cash generated from operations (eo Interest paid 7020) 4 Tax paid 2,778 ‘Net cash flow from operating activities Cash flows from investing activities: Purchase of PPE (4,110) /8. Purchase of investment property (900) 1/1 a0 Net cash from investing activities Cash flows from financing activities: Proceeds from issue of shares 2.10071 Payment fo lease creditor (120) 13 Proceeds from long-term [oan 100 / Payment of dividend 384) ‘Net cash flow from financing activities 1.696 Net increase in Cash and Cash Equivalents 2.464 Cash and Cash Equivalents at beginning of period 600)/ Cash and Cash Equivalents at end of period (1,804*60) 7,864 (40x % = 20 marks) b. Reasons: 1. The company has a positive inflow from its operating activities. ~ 2. Even though the company purchased PPE and IP for cash , but the company also issue shares for cash ¥ during the year and also took a loan” which is sufficient to cover the outflow ¥ 3. Some of PPE (equipment) was acquired not for cash, but by issuing ordinary shares”. 4, The company also acquire short-term investment which qualify as a cash equivalent”. Any 5 ¥ above or other relevant answers. (5x 1=5 marks) (Total: 25 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALJ CONFIDENTIAL Workings: ACIDEC 2016/FAR510 Bank Interest Payable old 511] bid 7087 144 | P&L finance cost 877 Bank Taxation Balance sd DT 41,0207 | Balance bid- DT 1687 ~ OT 240 = CT 96 1087 [P&L 71047 Ordinary Share Capital Balance cid 6540__| Balance b/d 4,200 Equipment 2407 Bank 2,1007 - Retained earnings Bank (Div.paid) 384/ | Bal bid 2.1607 old 4512/7 | PAT 2,7361 PAT 2,736 +Tax 1,104/ PBT 3,840 PPE Balance b/d 6,672 | Depreciation 3607 ‘OSC. 240/ | Deficit 2407 Reclassified from IP 714] _| Reclassified to NCAHFS 4207 ARR -Land 780/ | Balance cid 8.4967 Bank 44107 Lease creditor Bank 420 / | Bid -CL 807 Bal c/d NCL. 420), NCL 520 CL 60 Investment property b/d 720 | Reclassified -PPE 714/ Bank 900/ | SOPL-loss 6/ old 900 END OF SUGGESTED SOLUTION © Hak Cipta Universiti Teknologi MARA CONFIDENTIA