FAR510 – JUNE 2018

SUGGESTED SOLUTION

(a) NIA Equipment Bhd

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2017
RM’000
Revenue √956,000
Cost of sales (606,400+1,350) √√(607,750)
Gross Profit 348,250
Other Income (W1) √√√2542.5
Administrative expenses (W2) √√√√ (136,276.5)
Selling and distribution expenses √(35,000)
Finance cost (W2) √√(1,485)
Surplus on revaluation of land √300
Deficit on revaluation of building (32,500-28,125) √√(4,375)
Profit before taxation 173,956.00
Taxation (42,000+2,800) √√(44,800)
Profit for the year 129,156.00
Other Comprehensive Income:
Surplus on revaluation of land √of 24,700
Deficit on revaluation of the building √of(28,125)
125,731.00

Basic Earnings Per Share

129,156,000√
(w1) BEPS = -------------------- = RM1.29
100,000,000√
(√22)
Workings:
(a) Other Income
RM’000
Rental income √2,000
Exchange gain √500
Amortization of deferred gain √42.5
2,542.5
(b)
Admin Exp RM’000 Finance Cost RM’000
As per TB √116,000 √1,300
Depn: Building √of 3,250
Depn: P&M √of 16,526.5
Interest Fin Lease √185
Exchange loss √500
136,276.5 1,485

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 FAR510 – JUNE 2018

(b) NIA Equipment Bhd

Statement of Changes in the Equity for the year ended 31 December 2017
Ordinary Preference Ret.
ARR
Share Share Earnings
RM’000 RM’000 RM’000 RM’000
Balance as at 1 Jan 2017 100,000 25,000 28,125 53,000
Profit for the year√ 129,156.00
Building: Rev’n deficit √(28,125)
Land: Rev’n surplus (25,000 –
√√24,700
300)
Dividend paid √(25,000)
100,000 25,000 24,700 157,156
(√5)
(c) NIA Equipment Bhd
Statement of Financial Position as at 31 December 2017
Non-Current Assets: RM’000 RM’000
Property, plant and equipment√ 244,893.5
Investment property √ 45,000

Current Assets:
Inventory (119,300-1,350) √117,950
Trade and other receivables √ 90,000
207,950
497,843.5
Equity:
Share Capital 125,000
Retained Earnings √ 157,156
Other reserves 24,700
Non-Current Liabilities:
Deferred gain (170-42.5-42.5) √√85
Finance lease creditor (1850+185-600-456.5) √√√978.5
Loan from commercial bank √50,000
Deferred tax liability √15,300
Current Liabilities
Deferred gain √ 42.5
Trade and other payables (96,375+20,000-9,500-500) √√√106,375
Finance lease creditor (600-143.5) √√456.5
Tax payable (42,000- 30,000) √12,000
Bank overdraft (5,000-10,000-600+1,850-2000) √√√5,750
497,843.5
(√22)

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 FAR510 – JUNE 2018

Plant &
Land Building
Note to Property, Plant & Equip Equipment
RM’000 RM’000 RM’000
Balance as at 1 Jan 2017 √50,000 155,000 120,000
Elimination of Acc Depn √(25,000)
Surplus/(Deficit) on revaluation √25,000 √(32,500)
Disposal √(2,100)
Acquisition: leased assets √1,850
Acquisition: new assets √20,000
Balance as at 31 December 2017 75,000 97,500 139,750
Acc. Depreciation:
Balance as at 1 Jan 2017 25,000 48,000
Elimination of AD √(25,000) √(420)
Charge for the year √3,250 √16,526.5

Balance as at 31 December 2017 - 3,250 64,106.5

Net Book Value 75,000 94,250 75,643.5 244,893.5

(√11)
(60 x 0.5 = 30 marks)
Workings:
Land: RM
CA as at 1/1/17 50,000
FV 75,000
Surplus 25,000

Building
Bal as at 1/1/17 155,000
Accumulated Depreciation (25,000)
CA 130,000
Fair value 97,5000
Deficit 32,500

Dr Land 25,000
Cr SOPL 300
Cr ARR/OCI 24,700

Dr ARR 28,125
Dr SOPL 4,375
Cr Building 32,500

Depn Building = (97,500/30) =3,250

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 FAR510 – JUNE 2018

Opening balance Interest (10%) Payment Closing Balance

1,850,000 185,000 600,000 1,435,000

1,435,000 143,500 600,000 978,500

RM’000 RM’000
Dr Bank 1,850
Dr Acc Dep 420
Cr PPE 2,100
Cr Deferred gain 170
Dr Deferred gain 42.5
Cr Amortisation of deferred gain (SOPL) 42.5

Depn Plant n Equipment = (120,000- 2,100) – (48,000 - 420) x 20%

= 14,064
Leased Plant =1,850/4
=462.5

RM’000 RM’000
Dr Machine (200,000/10) 20,000
Cr Acc payable 20,000
Dr Depreciation (RM20,000/10) 2,000
Cr Acc dep 2,000
Dr Acc payable (95,000/10) 9,500
Dr Exchange Loss 500
Cr Bank (95,000,000/9.5) 10,000
Dr Acc payable 500
Cr Exchange gain (105,000/10) –(105,000/10.5) 500

Total depreciation: 14,064+462.5+2,000=16,526.5

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√. If 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)

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 FAR510 – JUNE 2018

b.
Construction cost
Borrowing cost
YE 2016 (Oct – Dec)
Less: Investment income
YE 2017 (Jan-31 Jan)
Less: Investment income
RM 4,250,000 /
3m x 7% x 3/12 = 52,500 //
1.5m x 5% x 3/12 = (18,750) //
3m x 7% x 1/12 = 17,500 /
1.5m x 5% x 1/12 = (6,250) //

(April – Dec) 3m x 7% x 9/12 = 157,500 / RM 202,500

RM 4,452,500 /
(10 x 0.5 = 5 marks)

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

for at nominal value√ of RM9,000√ or at the fair value√ of RM1,220,000√. If the company
account for the land at the fair value then it may be recognised as deferred income√ of
RM1,211,000 (RM1,220,000-9,000) √√ and amortised√ it over 10 years. √.

(10 x 0.5 = 5 marks)

(d) The building in Sarawak will be classified as a PPE√ until 30 September 2017√ as the
building is still in use. √ The building will be classified as a NCAHFS√ on 1 October 2017√ when
it is available for immediate sale √ as the building has been vacated√ and the sale is highly
probable √.

As at 31/12/2017 NCAHFS should be measured at the lower√ of CA & FVLCTS.√ The CA was
RM2,370,000√√√√ and FVLCTS was RM2,090,000√√. It should be measured at
RM2,090,000√. Since the CA higher than the FVLCTS, there is an impairment loss√ of
RM280,000√ transferred to SOPL. √

Working: RM
1/7/17 CA 2,000,000
Renovation 400,000
2,400,000
30/9/17 Depreciation 2,400,000/20 x 3/12 = (30,000)
CA 2,370,000
FVLCTS (2,200,000-110,000) (2,090,000)
Impairment loss 280,000
(20 x 0.5 = 10 marks)

QUESTION 3

a. Criteria for expenditure to be capitalised as intangible assets includes identifiability, control

and future economic benefit. √√ Identifiability is capable of being separated or removed from
the entity and sold, licensed, entered or exchanged, either individually or together with
related contract, asset or liability. √ Control is present if the entity has the power to obtain
future economic benefits flowing from the underlying resource and restrict others from
having access to those benefits√. Future economic benefits may arise from the sale of
products or services, cost saving or renting of the asset. √
(5 x 1 = 5)

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 FAR510 – JUNE 2018

b. Pappan Bhd can adopt revaluation model for all its intangible assets only if:-
i. There is an active market for the intangible assets.
ii. Revaluations will be made with such regularity that at the end of the reporting period
the carrying amount of the asset does not differ materially from its fair value.
iii. Entire class of intangible assets must adopt the revaluation model
iv. unless there is no active market for those intangible assets.
v. Fair value can be measured reliably.
(5 x 1 = 5)

c. The cost of the purchased customer lists amounted to RM350,000 can be recognized as an
intangible assets√ in accordance to MFRS 138√ and amortised√ over 5 years.√ The cost of
the purchased customer lists met the criteria of identifiability, √ control√ and future economic
benefits. √ However, if it is internally generated by the company, RM350,000 cannot be
recognised as an intangible assets√ and need to be expense off in the SOPL.√ Internally
generated customer list cannot be distinguished from the cost of developing the business as
a whole. √
(10 x 0.5 = 5 marks)

d. The cost incurred during research phase√ from January till Feb 2017 cannot be capitalized
√and should be written off to SOPL as expenses in the period they are incurred. √ This is
because during the research phase there is no certainty of future economic benefit will flow
to the entity. √ Even though development phase begins on March 2017 the cost incurred
cannot be capitalized till Aug 2017√ as it did not meet the recognition criterias of MFRS 138.
√

Total cost of RM400,000√√√√ (RM150,000+RM50,000+RM100,000+RM100,000) should be

written off as expenses in the year it is incurred. √

However, the capitalization may start from Sept 2017√ when management is confident on
the acceptance of the product to be sold√. There is a probable future economic benefits that
will flow to the entity√. Total cost of (RM100,000+RM30,000) RM130,000√√ need to be
capitalized in the SOPF√ and amortised√ based on the useful life of 10 years√ once the
product has been launched √.
(20 x 0.5 = 10 marks)

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 FAR510 – JUNE 2018

QUESTION 4
Emerald Bhd
Statement of cash flows for the year ended 31 Dec 2017
RM‘000 RM‘000
Cash flows from operating activities

Net profit before tax / 7,545

Adjustments:
Depreciation / 1,975
Interest expense / 630
Dividend income / (250)
Decrease in fair value of investment property / 100
Surplus on revaluation of equipment / (1000)
Loss on disposal / 10 1,465

Changes in working capital:

Increase in inventory / (935)
Increase in receivable / (1,404)
Decrease in payable / (1,486)
Increase in accrued expenses / 5
-3,820
Cash generated from operations 5,190

Less: Tax paid (W1) // (1,875)

Interest paid (W2) /// (622)
Net Cash flows from operating activities 2,693

Cash flows from investing activities

Purchase of PPE (W3) ///// (375)
Disposal of equipment (W4) /// 115
Payment for development cost / (750)
Purchase of short-term investment (8900-6600)*90% //(2070)
Dividend income / 250
Net Cash flows from investing activities -2830

Cash flows from financing activities

Issuance of shares (49,000-30,000) / 19,000
Dividend paid (W5) /// (6,530)
Redemption of debentures / (2,500)
Payment of bank loan / (3,900)
Payment to finance lease (W6) // (363)
Net Cash flows from financing activities 5,707
Net increase in cash flow 5,570
Cash and cash equivalent at the beginning (660+5373) 6,033 //
Cash and cash equivalent as the end (890+10713) 11,603 //

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 FAR510 – JUNE 2018

Workings

W1
Taxation
tax recov (b/d) /475
Cash 1,875 SOPL / 1,950
Deferred tax /100
Tax recov (c/d) 500

W2
Interest
Cash 622 b/d 100
c/d / 108 SOPL / 630

W3
Property plant equipment
Bal b/d 26,270 Disposal (250-125) /125
Finance lease /500 Depn /1,975
ARR /2,500
SOPL /1,000
Cash 375 Bal c/d 28,545

Or RM4900/ – RM1,470/ – RM800/ – RM3,005/ = RM375’/

W4
Disposal of equipment
PPE (250-125) //125 Cash 115
SOPL –Loss /10

W5
Retained Profit
Dividend paid 6,530 b/d /7,505
c/d /6,570 SOPL /5,595

W6
Finance lease
Cash 363 b/d (900+110) / 1,010
c/d (1000+147) 1,147 Equipment / 500

40 /x 1/2 = 20 marks
(Total: 20 marks)

END OF SOLUTION