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UKAF1083 FA2 – Tue 17 Sept 2017 (Adapted)

Section A: Answer the compulsory question. [Total: 40 marks]

Q1. The following trial balance related to Arik Berhad, a manufacturer of pharmaceutical
products, at 31 March 2017:

Debit Credit
RM’000 RM’000
Freehold property
(land RM24,000; building RM175,000) 199,000
Plant and equipment at cost 20,468
Accumulated depreciation at 1 April 2016:
Building 3,900
Plant and equipment 7,144
Motor vehicles at cost 55,237
Accumulated depreciation on motor vehicles at 1 April
2,450
2016
Capitalised development expenditure at 1 April 2016 35,000
Development expenditure - accumulated amortisation
7,000
at 1 April 2016
Sales revenue 105,200
Purchases 8,063
Inventory at 1 April 2016 6,798
Trade receivables/payables 62,200 51,800
Distribution costs 4,563
Administrative expenses 18,642
Bank 45,756
Debenture interest 34
8% Debenture 5,000
Retained earnings at 1 April 2016 26,755
Contributed capital 155,000
Total 410,005 410,005

The following notes are relevant:

 The value of inventory on hand as at 31 March 2017 was RM 233,000. Included the
inventory was obsolete goods costing RM6,000 which was expected to be sold for
RM5,000.

 The non-current assets have not been depreciated for the year 31 March 2017.
Depreciation charges are as following:
Building – 5% per annum on straight line method
Plant and equipment - 20% per annum on reducing balance method
Motor vehicles - 25% per annum on straight line method.

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All depreciation expense is to be apportioned 80% to administration expenses
and the balance to distribution costs.

 The land was revalued to RM27,000,000 at 31 March 2017.

 A provision for doubtful debts is to be made at 2 per cent of trade receivables.


This is to be treated as administrative expenses in the books.

 During the year, Arik carried on a project to develop a new drug that
dramatically shortened the recovery period for flu infection. The project cost
the company RM1.6million however Arik abandoned the project due to the slim
possibility to gain Malaysian Medical Device Authority (MDA) approval. Arik
then spent RM2.5million on another project developing a kind of shot that
achieves the same goal for flu recovery, and the company is confident in gaining
MDA for the new shot and in making profits out of the shot. The project is still
under development as at year end. No record found on any of these transactions.

Amortisation is charged at 20% per annum on straight line method and research
and development expenses are charged to administrative expenses.

 A month before the year end, a fire destroyed a significant proportion of Arik’s
inventories. Arik has since been negotiating compensation with their insurers.
Initially, the insurers were of the view that Arik had not followed applicable
legislation to protect against fire damage and were contesting the claim. Arik
was confident that they had complied with the legislation and referred the matter
to their lawyers. In April 2017, the board of directors have received a letter from
the insurance company stating that they are satisfied that Arik did comply with
appropriate legislation. The lawyers have advised the directors that it is now
probable that they will receive compensation in the region of RM50,000.

 The figure for dividends paid and proposed is made up as follows:

Final dividend for the year ended 31 March 2016 paid in RM4,900,000
current financial year.
Interim dividend for 31 March 2017 paid in current RM2,500,000
financial year.
Proposed final dividend to be paid in June 2017 RM6,000,000

No transaction had been posted on dividend paid during the year.

 As at 31 March 2017 there was selling and distribution expenses prepaid of


RM565,000.

 Ignore taxation.

(For the purpose of this question you are to assume that financial statements for year
ended 31 March 2017 yet to finalised and approved by the directors.)

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Required:

(a) Prepare a Statement of Profit or Loss and Other Comprehensive Income for the
year ended 31 March 2017.

(b) Prepare a Statement of Changes in Equity for the year ended 31 March 2017.

(c) Prepare a Statement of Financial Position as at 31 March 2017.

(Show all your workings.)

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Section B: [Total: 60 marks]
Answer ANY TWO (2) out of THREE (3) questions in this section.

Q1. Sara and Simi had been in partnership for many years and share profit and loss equally
but now they have decided to retire. The statement of financial position as at 30 June
2017 was as follows:

Non-current assets RM
Premises 120,000
Fixtures and fittings 14,800
134,800
Current assets
Inventories 10,000
Bank 10,000
Trade receivables 17,800
37,800
Total assets 172,600

Capital and liabilities


Sara 70,000
Simi 50,000
120,000
Current liabilities
Trade payables 52,600
Total equity and liabilities 172,600

On 30 June 2017, partnership sold their business to Perfect Berhad. The statement of
financial position of Perfect Berhad as at 30 June 2017 before the sale was as follows:

ASSETS
Non-current assets RM
Premises 815,100
Equipment 185,200
Motor vehicles 65,400
1,065,700
Current assets
Inventories 83,800
Trade receivables 68,000
Cash and cash equivalents 8,562
160,362
Total assets 1,226,062

EQUITY AND LIABILITIES


Contributed capital 958,000
Retained profit 224,000
1,182,000
Current liabilities
Trade payables 44,062
Total equity and liabilities 1,226,062

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Section B Q1. (Continued)

For the sale of the business, partnership’s premises were revalued at RM280,000 and
trade receivables balances of RM1,200 were to written off.

Perfect Berhad took over all the assets and liabilities except the bank account. The total
purchase consideration was RM440,000. This was made up as follows:

 RM70,000 in cash.
 RM120,000 in 8% debentures (maturing at 2025).
 The balance by ordinary shares.

The debentures and shares were shared equally by the partners.

At the same time as the business purchase, the directors of Perfect Berhad decided to
have their own premises revalued. The premises were revalued at RM1,000,000.

Required:

(a) Prepare Perfect Berhad’s statement of financial position as at 1 July 2017,


immediately after the partnership had been acquired. (15 marks)

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Section B (Continued)

Q2. (a) The statements of financial position of Mantak Berhad at 31 March 2017 and
31 March 2016 were as follows:

2017 2016
ASSETS RM’000 RM’000
Non-current assets
Property, plant and equipment 550 280
Investments 700 505
1,250 785
Current assets
Inventories 229 219
Trade receivables 198 220
Cash at bank and in hand 137 71
564 510
Total assets 1,814 1,295

EQUITY AND LIABILITIES


Contributed capital 870 600
Revaluation reserve 35 nil
Retained earnings 606 380
1,511 980
Non-current liabilities
6% debentures 40 60
Current liabilities
Trade payables 115 165
Tax payable 65 35
Bank overdraft 83 55
303 315
Total equity and liabilities 1,814 1,295

Further information was available as follows:

 Property plant and equipment


31.3.2017 31.3.2016
Cost/valuation 645,000 335,000
Accumulated depreciation (95,000) (55,000)
550,000 280,000

The property, plant and equipment at 31 March 2017 include freehold


premises that have been revalued during the year at an amount of
RM35,000 in excess of their historical cost.

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During the year ended 31 March 2017, an item of property, plant and
equipment that had a cost of RM75,000 and a net book value of
RM42,000 were sold for RM72,000.

 Some debentures were redeemed at par on 30 September 2016.

 During the year, investment income of RM4,000 was received and


interim dividends of RM13,000 were paid.

 Taxation expense for the year was RM65,000.

Required:

Prepare a statement of cash flows for the year ended 31 March 2017 using the
indirect method and complying with MFRS107 – Statement of Cash Flows.

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