FAR510 – JUNE 2019

SUGGESTED SOLUTION
(a) E-Tronics Bhd
Statement of Profit or Loss and Other Comprehensive Income for the year ended
31 December 2018

RM’000
Revenue √339,450
Cost of sales [199,880+8,800] √√(208,680)
Gross Profit 130,770
Other Income
Surplus on revaluation of land √25,000
Surplus on revaluation of building √15,000
Amortisation deferred gain (12,000/3) √4,000
Gain on sale and leaseback √26,125
Expenses
Administrative expenses (52,070)
Selling and distribution expenses √(25,200)
Finance cost √(9,000)
Profit before taxation 114,625
Taxation (12,480-120) √√(12,360)
Profit for the year 102,265
Other Comprehensive Income:
Surplus on revaluation of building √​of​ 10,000
112,265

Basic Earnings Per Share = RM0 66

102,265,000 – 3,310,000√ 98,955,000
BEPS = --------------------------------------- = ----------------- = RM0.66
150,000,000√ 150,000,000
Workings (W1):
Administrative Expenses
As per Trial Balance √30,500
Depreciation: Building √of 3,625
(5,570 + 4,250 )
Depreciation: Specialised computers
√√9,820
Loss on exchange differences √5,625
Lease rental expense √ 2,500
52,070

(√​20 x ½ = 10 marks)

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 FAR510 – JUNE 2019

(b) E-Tronics Bhd

Statement of Changes in the Equity for the year ended 31 December 2018
Ordinary Preferenc Ret.
ARR
Share e Share Earnings
RM’000 RM’000 RM’000 RM’000
Balance as at 1 January 2018 √150,000 √75,000 √0 √50,915
Profit for the year√ 102,265
Building: Revaluation surplus √10,000
Preference dividend paid √(3,310)
Transfer to RE (10,000/40) √​√of​(250) √250
150,000 75,000 9,750 150,120
(√10 x ½ = 5 marks)
(c) E-Tronics Bhd
Statement of Financial Position as at 31 December 2018
Non-Current Assets: RM’000 RM’000
Property, plant and equipment√ 512,695
Intangible assets √ 10,400
Current Assets:
Inventory (36,580-8,800) √√27,780
Trade and other receivables √ 35,200
Tax recoverable (2,850+19,580-12,480) √√9,950
Bank (40,100-21,250+89,000-2,500) 178,280
√√√√105,350
701,375
Equity:
Share Capital 225,000
Retained Earnings √ 150,120
Other reserves 9,750
Non-Current Liabilities:
Deferred gain (12,000-4,000-4,000) √√4,000
6% AMD Loan √150,000
Deferred tax liability (1,850-120) √√1,730
Current Liabilities
Deferred gain √ 4,000
Trade and other payables (87,400+69,375) √√ 156,775
701,375

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 FAR510 – JUNE 2019

Spec.
Land Building Plant
Comp
Note to Property, Plant & Equip
(RM’000
(RM’000) (RM’000) (RM’000)
)
Balance as at 1 January 2018 260,000 135,000 82,500 55,700
Elimination of Acc Dep √(15,000)
Surplus on revaluation √25,000 √25,000
Disposal √(82,500)
Addition 85,000
Balance as at 31 December 2018 285,000 145,000 0 140,700
Acc. Depreciation:
Balance as at 1 January 2018 15,000 31,625 44,560
Elimination of Acc Dep √(15,000) √(31,625)
√√√​9,82
Charge for the year (W2) √3,625
0
Balance as at 31 December 2018 - 3,625 0 54,380
Carrying Value 285,000 141,375 0 86,320 512,695

Working (W2) :
Depreciation:
1) Building: 145,000,000 / 40 = 3,625,000
2) i) Specialised computers : 55,700,000/10 = 5,570,000
ii) New: 85,000,000/10 x 6/12 = ​4,250,000
Total ​9,820,000

(√30 x ½ = 15 marks)
(Total: 30 marks)
QUESTION 2
a. Classification of the asset:-
Each floor of the building cannot be sold separately, so the company has to assess which is
more significant. √ If the owner-occupied is insignificant√ then the building can be classified as
an investment property√ based on MFRS140√​. I​f the owner occupied is significant√ then the
building can be classified as PPE√ based on MFRS116√. In this case, the owner-occupied is
significant, √ therefore it should be classified as PPE√ based on MFRS116√.
(10 x 0.5 = 5 marks)

b.
RM
Construction cost 25,500,000 /
Borrowing cost
YE 2016 20m x 8% x 6/12 = 800,000//
Less: Investment income 8m x 6% x 3/12 = (120,000) // 680,000
(1 October 2016 – 31 Dec 2016)

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 FAR510 – JUNE 2019

YE 2017 20m x 8% x 9/12 = 1,200,000 /

Less: Investment income 8m x 6% x 6/12 = (240,000) // 960,000
(1 Jan 2017 – 31 May 2017 & 1 Sept
2017 – 30 Sept 2017)

YE 2018 20m x 8% x 6/12 = 800,000 / 800,000

RM27,940,000 /

(10 x 0.5 = 5 marks)

c. For the year ended 31 December 2017, the hospital building in Temerloh is classified as
PPE​√ based on MFRS116​√​. It cannot be classified as held for sale​√ based on MFRS 5​√ as
it is not available for immediate sale since relocation of staff and vacant activities take place
until 31 March 2018. ​√

For the year ended 31 December 2018, even though the building is available for immediate
sale on 31 March 2018, ​√ ​but the sale is not highly probable​√ until 1 August 2018 when the
company managed to locate a buyer​√​. Therefore, the hospital building can be classified as
NCAHFS only on 1 August 2018​√ when it is available for immediate sale ​and the sale is
highly probable​√​.
(10√ x 0.5 = 5 marks)

d. According to MFRS 5, NCAHFS shall be measured at the lower​√ of carrying amount (CA) √
and fair value less cost to sell (FVLTCS)​√​. The FVLCTS is RM11,500,000
(RM11,750,000-RM250,000) √ √ and the CA is RM11,400,000​√​. It should be measured and
capitalized in the SOFP at RM11,400,000​√​. Since the CA is lower than the FVLCTS​√​, there
is no impairment loss​√​ to be written off to SOPL​√
(10√ x 0.5 = 5 marks)

e. Land received is a non-monetary government grant√. Non-monetary grant can be accounted

for at nominal value of ​RM5,000​√ or at the fair value of RM3,000,000√. If the company
accounts for the land at nominal value the journal entries will be :
Debit (RM) Credit (RM)
Land, at nominal value 5,000 √
Cash 5,000 √

If the company accounts for the land at the fair value then it may be recognised as deferred
income√ of ​RM2,995,000 ​(RM3,000,000-​5,000​) and amortised it over 10 years. √. The journal
entries will be :
Debit (RM) Credit (RM)
Land, at fair value 3,000,000 √
Cash 5,000 √
Deferred income 2,995,000 √

(10 x 0.5 = 5 marks)

(Total: 25 marks)

QUESTION 3

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 FAR510 – JUNE 2019

a. Accounting treatment for the project undertaken by Ibnu Sina Pharmaceutical on

anti-cancer therapy agent.
For the year ended 31 December 2017, the anti-cancer therapy agent is at research
phase√ where there is no future economic benefit incurred.√ RM475,000 will be
expensed off to SOPL. √

For the year ended 31 December 2018, RM300,000 will be expensed off√ eventhough it
is already at development phase, but there is still uncertainty of future economic benefit√
that will flow to the entity. RM1,400,000 spent on acquiring a special machine will be
capitalized as PPE and depreciation of RM70,000 (1.4m/10 X 6/12) treated as
development cost√.

In July 2018, the anti-cancer therapy agent was successfully developed and met the
criteria for capitalisation√ RM750,000 (RM500,000√ +RM250,000√+RM70,000√) can be
capitalised.

(10√ x1 = 10 marks)
iii. Treatment of customer list created by the board of directors.
Customer list created by the company is internally generated intangible assets.√ MFRS
138√ prescribes that internally generated shall not be recognised √ as an asset because
it is not an identifiable resource√ (it is neither separable nor does it arise from contractual
or other legal rights.) nor the cost can be measured reliably √.
(5√ x 1 = 5 marks)

iv. Amount that can be capitalized for Alzheimer’s project.

Amount to be capitalised will be the lower of√ carrying amount and recoverable amount.
√ On 31 December 2018, carrying amount of the Alzheimer’s project is RM2,200,000. √
The recoverable amount of RM1,900,000 √ is lower than the carrying amount.
Impairment loss of RM300,000√ will be expensed off in the SOPL.√ RM1,900,000 will
be capitalised.√ Since production will begin on October 2018, amortisation of RM95,000
√√ (1.9m/5 x 3/12) will be provided. Amount capitalised in SOFP will be RM,1,805,000√
(1,900,000-95,000) for the year ended 31 December 2018.
(10√ x 1=10 marks)
(Total: 25 marks)

QUESTION 4

Bika Menthol Bhd

Statement of Cash Flows for the year ended 31 December 2018​ ^
RM`000 RM`000
Cash flows from operating activities​^
Loss before tax (3,650) √
Adjustments for :
Interest receivable (800) √
Finance costs 545 √
Depreciation expense (1500+1800) 3,300 √
Loss on sale of non-current assets 800 √
Deferred gain - grant (2,000) √

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 FAR510 – JUNE 2019

Amortization-intangible assets 7,300 √

Operating profit before working capital changes 5,495
Decrease in inventories 10,500 √
(44,400
Increase in trade receivable √
)
(11,150
Decrease in trade payables √
)
Cash generated from operations (39,555
)
Interest paid (545) √
Taxes paid (3,500) √√√√
Net cash outflows from operating activities (43,600)

Cash flows from investing activities​^

(14,850
Purchase of plant and machinery √√√√√
)
Disposal of plant and machinery 3,250 √
(40,000
Purchase of investment √
)
Interest received 200 √√√
Net cash outflows from investing activities (51,400)

Cash flows from financing activities​^

Dividend paid (2,000) √√√√
Received bank loan 39,250 √
Proceeds from issue of shares (98,500-71,000) 27,500 √√
Net cash inflows from financing activities 64,750

Net decrease in cash and cash equivalent -30,250

Cash and cash equivalent at the beginning of period 75,750√√
Cash and cash equivalent at the end of period√ 45,500√√√

(38√*0.5 = 19 marks)
(4^*0.25=1 marks)
Total = 20 marks)
Workings:

Beginnin
Ending
g
(RM’000
Cash and cash equivalents (RM’000)
)
Bank overdraft - √ (2,150)
Short term investment √38,500 √25,800
Cash at bank √37,250 √21,850
75,750 45,500

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 FAR510 – JUNE 2019

Interest receivable
RM’000 RM’000
Bal b/d ^20,450 Cash √200
SOPL √800 Bal c/d ^21,050
21,250 21,250

Tax payable
RM’000 RM’000
Tax payable b/d ^1,500
Deferred tax c/d ^31,500 Deferred tax b/d ^31,250
Tax recoverable ^250
Cash √3,500 SOPL √2,000
35,000 35,000

Retained earnings
RM’000 RM’000
^194,75
Balance b/d
0
Balance c/d ^187,550 Revaluation Reserve √450
Loss √5,650
Dividend paid √2,000
195,200 195,200

Property Plant Equipment

RM’000 RM’000
^152,00
Balance c/d
0
Balance b/d ^134,000 Depreciation √3,300
Revaluation √10,500 Disposal √4,050
Cash √14,850
159,350 159,350

^ = 0.25 marks
√ = 0.5 marks

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 FAR510 – JUNE 2019

END OF SOLUTION