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AC/OCT 2006/ACC394

UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION

COURSE COURSE CODE EXAMINATION TIME

: : : :

COMPANY ACCOUNTS ACC394 OCTOBER 2006 3 HOURS

INSTRUCTIONS TO CANDIDATES 1. 2. 3. This question paper consists of five (5) questions. Answer ALL questions in the Answer Booklet. Start each answer on a new page. Do not bring any material into the examination room unless permission is given by the invigilator. Please check to make sure that this examination pack consists of: i) ii) the Question Paper an Answer Booklet - provided by the Faculty

4.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 9 printed pages
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AC/OCT 2006/ACC394

QUESTION 1 Star Bhd. was incorporated with an authorized capital of RM90,000,000, consists of 90,000,000 units of ordinary shares of RM1.00 each. Currently, it has issued and fully paidup capital of RM8,000,000. On 2 February 2006, the directors invited applications for issue of 20,000,000 ordinary shares at a premium of 10 sen each on the following terms: On application On allotment On 1 s t and final call 30 sen (including premium) 40 sen 40 sen

On the closing date, applications for 30,000,000 shares were received and the directors decided to: a. b. c. Refund the application money to 2,000,000 unsuccessful applicants; Allot the remainder of the available shares on a pro-rata basis among the other applicants; and Utilise the surplus received on applications in part payment of the amount due on allotment.

The balance due on allotment was received on 4 April 2006 except from En. Ahmad who held 20,000 shares. He paid the allotment money together with 1 s t and final call. Another shareholder, En. Marimuthu who held 10,000 shares had failed to pay the 1 s t and final call when it was due. After due notice, his shares were forfeited and later reissued as fully paid shares at 90 sen per share.

Required: You are required to show the necessary ledger entries to record the above transactions. (Total: 12 marks)

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AC/OCT 2006/ACC394

QUESTION 2

Oasis Ltd is a public company which has an authorised capital of RM100,000,000 consisting of 100,000,000 ordinary shares of RM1 each. The following balances were extracted from the books of the company as at 31 March 2006: Debit RM'000 Issued and fully paid ordinary share capital Share premium General reserve Retained profit as at 1 April 2005 10% Debentures Goodwill Freehold land Investment Quoted Unquoted Buildings: Cost Accumulated depreciation Fixtures and Fitting: Cost Accumulated depreciation Cash Inventory as at 1 April 2005 Trade Receivables/Payables Purchases/sales Administrative salaries Sales staff salaries Bad debts Directors' remuneration Advertising expenditure Motor expenses Water and electricity Telephone and postage Bank overdraft Discount allowed Tax paid Income from investment (net of tax): Quoted Unquoted Credit RM'000 26,100 250 150 1,354 600

5,500 10,000 5,800 3,200 2,500 90 1,400 470 1,208 720 420 3,650 500 70 20 280 60 230 180 80 9 160 36 18 35,987

360 6,540

19

35,987 Additional information: 1. 2. Inventory at 31 March 2006 was valued at RM740.000. The auditors' fees for the year are expected to be RM71,000.

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AC/OCT 2006/ACC394

3.

The estimated corporation tax charge on the profit for the year was RM170,000 (exclusive of tax credit). Tax rate is at 28%. Depreciation is to be provided on a straight line basis at 2% per annum for buildings and 20% per annum on fixture and fittings. The following items are to be apportioned between distribution costs and administrative expenses as below: Distribution 25% 40% 50% Administrative 75% 60% 50%

4.

5.

Directors' remuneration Water and electricity, telephone and postage, depreciation on buildings Motor expenses, depreciation on fixtures and fittings 6. The Board of Directors had decided on the following: i. ii. 7.

Transfer of RM150,000 to General Reserve. A final dividend of 2.5% per share on the issued ordinary shares.

As at 31 March 2006, the market value of the quoted investment was RM17,400,000 and directors' valuation on the unquoted investment was RM4,800,000. On 30 March 2006, the company has entered into an agreement to build a shopping complex. The estimated cost was RM2,000,000.

8.

Required: Based on the information provided, prepare the: a. b. c. d. Income Statement for the year ended 31 March 2006; Balance Sheet as at 31 March 2006; Statement of Changes in Equity for the year ended 31 March 2006; and Notes to accompany the financial statements. (Total: 25 marks)

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AC/OCT 2006/ACC394

QUESTION 3 Followings are the balance sheets of Nowseeheart Bhd and Far East Bhd as at 31 December 2005: Nowseeheart Far East Bhd Bhd RM RM Non current assets Freehold Land 130,000 Motor Vehicles at book value 104,000 150,000 Plant and Machinery at book value 130,000 160,000 Investments in Far East Bhd: 150,000 units of Ordinary Shares 255,000 60,000 units of 10% Preference Shares 90,000 20,000 9% Debentures 20,000 Current assets Inventories Trade receivables Loan to Far East Bhd Bank Financed by: Ordinary Shares of RM 1 each 10% Preference Shares of RM 1 each General Reserves Profit and Loss Long Term Liabilities 9% Debentures Current Liabilities Preference dividend payable Loan from Nowseeheart Bhd Trade payables 74,000 137,200 90,800 666,000 200,000 120,000 60,000 97,600

100,000 169,000 2,000 158,000 1,104,000 750,000 60,000 50,000 125,800

80,000

4,320 113,880 1,104,000

8,640 2,000 97,760 666,000

Additional information: 1. Nowseeheart Bhd acquired the investments in Far East Bhd on 1 January 2005. At this date, the balances of the General Reserves and the Profit and Loss accounts of Far East Bhd were RM32.000 and RM30.000 respectively. Far East Bhd later declared and paid 15% ordinary dividend out of profit available at 31 December 2004. Nowseeheart Bhd had credited its portion to the profit and loss account. At the acquisition date of Far East Bhd, the fair value of its Freehold Land and Plant and Machinery were RM200.000 and RM120,000 respectively. Far East Bhd did not adjust its books to reflect the new value. Plant and Machinery were depreciated at 10% on reducing balance method.
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2.

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AC/OCT 2006/ACC394

3.

On 28 December 2005, the board of directors of both companies decided to declare the ordinary dividend as follows: Nowseeheart Bhd Far East Bhd 6% 5%

4.

Both companies have not recorded the debenture interest for the year ended 31 December 2005. Debtors of Nowseeheart Bhd amounted to RM50.000 is due from Far East Bhd. Included in the inventory of Nowseeheart Bhd, RM20.000 were in respect of inventory purchased from Far East Bhd. Far East Bhd invoiced the inventory at 25% plus cost. Nowseeheart Bhd had not yet credited its share on preference dividend payable from Far East Bhd. Corporate tax rate is at 28%.

5. 6.

7.

8.

You are required to prepare the Consolidated Balance Sheet of Nowseeheart Bhd and its Subsidiary as at 31 December 2005. (Show necessary workings) (22 marks)

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AC/OCT 2006/ACC394

QUESTION 4

Below are the financial statements of Mirwana Bhd for the accounting year ended 31 December 2005.

Mirwana Bhd Income Statement for the year ending 31 December 2005 RM 750,000 367.500 RM 382,500 7,500 5,000 7.500 397,500 93,750 18,750 63.750 176.250 221,250 82.500 138,750

Turnover Cost of sales Gross Profit Dividend income Gain on disposal of investment Gain on disposal of plant & machinery Less: Wages and salaries Interest expense Other expenses Profit before tax Taxation Profit after taxation Balance Sheet as at 31 December

2005 RM Non current assets Land and building Plant and machinery Less: Accumulated Depreciation Motor vehicles Less: Accumulated Depreciation Long term investment Current assets Inventory Trade receivables Cash at bank 737,500 112,500 18.750 93,750 90,000 13.750 76,250 112,500 75,000 7.500 150,000 22.500

2004

RM
525,000

127,500

67,500 150,000

26,250 77,500 71,250 1,195,000

18,750 63,750 56,250 1,008,750

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AC/OCT 2006/ACC394

Financed by: Ordinary share capital @RM 1 Share Premium Profit and Loss Non-Current Liabilities 10% Debentures Bank loan Current liabilities Trade payables Accrued wages Accrued interest Tax payable Proposed dividend

515,000 87,000 262,500 110,500 37,500 46,875 2,500 1,875 75,000 56,250 1,195,000

375,000 75,000 187,500 225,000

56,250 3,750 37,500 48,750 1,008,750

Statement of Changes in Equity for the year ended 31 December 2005 Ordinary share capital RM 375,000 Share premium RM 75,000 Profit and loss

RM
187,500 138,750 (7,500) (56,250)

Bal b/d Profit for the year Dividend: Interim Proposed Issue of shares Bal c/d Additional information: 1.

140,000 515,000

12,000 87,000

262,500

Durina the vear. one of the machinerv was disDosi3d for cash. There acquisition of any plant and machinery. Increases in land and building and motor vehicles were due to acquisitions during the year. Included in other expenses was depreciation for the current year amounted to RM10,000. This comprised of depreciation on plant and machinery amounting to RM3.750 and the balance was depreciation on motor vehicles. Long term investment was sold at a profit. Tax rate is 28%.

2.

3.

4. 5.

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AC/OCT 2006/ACC394

Required:

Prepare a Cash Flow Statement for the year ended 31 December 2005 using the direct method. (17 marks)

QUESTION 5 A. Shine Ltd manufactures components for the motor vehicle industry. The following is a summary of some of its accounting ratios as at 30 April 2005 and 30 April 2006:

Gross profit ratio Net profit ratio Working capital ratio Liquidity ratio Acid test ratio Stock turnover Debtors' ratio Creditors' ratio Required: a.

2005 2 . 1 1.89 1 . 8 1 . 4 1.25 6 . 6 55 days 74 days

2006 1.89 1.70 2 . 0 1 . 1 1 . 0 6 . 2 65 days 81 days

b.

Write a report to one of the company's major shareholder on the interpretation of change in company's profitability, liquidity and working capital position over the year ended 30 April 2006. Indicate also the overall conclusion on the company's performance. (8 marks) Explain what each of the following intended to measure: i. ii. Return on Capital Employed Stock Turnover Ratio (3 marks)

B.

i.

Give any 2 (two) uses of share premium accounts as stated in the Companies Act 1965. (4 marks) Define the term 'minority interest'. Briefly explain the accounting treatment for the minority interest in the Consolidated Balance Sheet. (5 marks) Explain the differences between bonus issue and rights issue. (4 marks) (Total: 24 marks)

ii.

iii.

END OF QUESTION PAPER

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