FAR460 – DEC 2016

QUESTION 1
a.
Fresh Dairy Berhad
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2016
RM'000
Sales 980,073.00 √
Cost of sales (714,554.65) 3√
Gross Profit 265,518.35
Other income 2,000.00 √
Administration expenses (20,885.10) 6√
Distribution expenses (121,628.00) √
Other operating expenses (40,876.00) √
Finance cost (640.00) 2√
Profit before tax 83,489.25
Taxation (30,000.00) √
Profit after tax 53,489.25

Other Comprehensive Income: √

Surplus on revaluation of land 370.00 √
Total comprehensive income 53,859.25

18√

Workings:
  Admin Distribution Finance Cost of
  Expenses Expenses Cost Sales
  RM'000 RM'000 RM'000 RM'000
Balance as per trial balance 25,067.00 121,628.00    
Depreciation:        
Building 1,001.50      
Machineries       5,171.65
Motor vehicles  1,240.40    
Office equipment 76.20
Provision for breach of contract (7,000.00)      
Provision for court costs 500.00      
Red. Preference shares dividend     500.00  
Debenture interest (8mx7%x3/12)     140.00  
Sales       980,073.00
Gross profit       (270,690.00)
Total 20,885.10 121,628.00 640.00 714,554.65

b.

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 FAR460 – DEC 2016

Fresh Dairy Berhad

Statement of Changes in Equity for the year ended 30 June 2016
Shares Retained Revaluation
Capital Earnings Reserve
RM'000 RM'000 RM'000
Opening balance √ 74,000.00 √ 92,160.00 -
Prior year adjustment:
Depreciation √ (250.00)
Machinery component   √ 2,500.00  
Restated balance √ 74,000.00 94,410.00 -
Net profit after tax √ 53,489.25
Other comprehensive income √ 370.00
Dividend paid √ (5,920.00)
Closing balance 74,000.00 141,979.25 370.00
8√

c.

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 FAR460 – DEC 2016

Fresh Dairy Berhad

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 FAR460 – DEC 2016

Statement of Financial Position as at 30 June 2016

RM'000
Non-current Assets
Property, plant and equipment √ 58,575.25
Investment property 6,000.00 √
Biological assets 69,000.00 √
Intangible assets 590.00 √

Current Assets
Inventories 92,545.00 √
Accounts receivable 37,346.00 √
264,056.25

Equity
Shares capital √ 74,000.00
Retained earnings √ 141,979.25
Other reserves √ 370.00

Non-current Liabilties
5% Redeemable preference shares √ 10,000.00 √
7% Debentures 8,000.00 √

Current Liabilities
Accounts payable 24,893.00 √
Provision for breach of contract √ 500.00 √
Accruals (949 +140) 1,089.00 √√
Tax payable (30,000-28,830) √ 1,170.00 √
Bank overdraft 2,055.00 √
264,056.25
20√

Note on Property,Plant and Equipment

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 FAR460 – DEC 2016

Machinerie
Land Building s Motor Office Total
Equipmen
Vehicles t
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cost / Valuation
√ 167,304.0
Balance as at 1.7.2015 √ 5,630.00 50,075.00 √ 98,433.00 √ 12,404.00 √ 762.00 0
Prior year adjustment     √ 2,500.00     2,500.00
169,804.0
Restated balance 5,630.00 50,075.00 100,933.00 12,404.00 762.00 0
Surplus on revaluation √ 370.00 370.00
Transfer to IP √(6,000.00) (6,000.00)
Balance as at 164,174.0
30.6.2016 0.00 50,075.00 100,933.00 12,404.00 762.00 0

Accumulated Depreciation
Balance as at 1.7.2015 23,948.00 66,487.00 7,148.00 276.00 97,859.00
Prior year adjustment     √ 250.00     250.00
Restated balance 0.00 23,948.00 66,737.00 7,148.00 276.00 98,109.00
√
Charge for the year √ 1,001.50 √√ 5,171.65 1,240.40 √ 76.20 7,489.75
Balance as at 105,598.7
30.6.2016 0.00 24,949.50 71,908.65 8,388.40 352.20 5

Carrying amount 0.00 25,125.50 29,024.35 4,015.60 409.80 58,575.25

Depreciation expense for: machineries 98,433/20 yrs = 4,921.65

Component 2,500/10 yrs = 250.00
5,171.65
14√
(Total 60√ x ½ = 30 marks)

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 FAR460 – DEC 2016

QUESTION 2

a. i. The machines MX16 and TX5 are assets that are resources controlled by
MakeUp Bhd as a result of past events (purchased earlier) from which future
economic benefits are expected to flow in to the entity.
(2 marks)

ii. The machines MX16 and TX5 are classified in accordance to MFRS 116 Para 6
as Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, and
(b) are expected to be used during more than one period
(3 marks)

b.
i. The company cannot capitalize the maintenance and insurance cost √.
The maintenance and insurance cost are cost incurred in servicing √ the machine MX16.
These costs do not provide future economic benefits √ to the company.
Do not qualify for the recognition as asset. √
The maintenance and insurance cost of the machine total up to RM15,000 per annum is
a revenue expenditure. √
Should be accounted as expenses √
Written off in the Statement of Profit or Loss √
(Any 5√ = 5 marks)

ii. Any subsequent cost incurred is capitalized if they meet the asset recognition criteria √
Examples: (a) increase the useful life (b) improve output / quality (c) reduce operating
costs (d) increase production capacity.

The repair cost did not meet the asset recognition criteria √
It is treated as an expense and will be written off in the Statement of Profit or Loss √.
However, the installation of a new component costing RM45,000 for the same machine
MX16 will be capitalized. √
It increase the production capacity.√
(5 marks)

c..
RM
Initial cost (760+15+20+10-5) 800,000 5√
Accumulated depreciation (800,000 /8 x 5 years) 500,000 3√
Carrying amount as at 30/6/2015 300,000
Cost of new part component 48,000 √
Adjusted carrying amount as at 30/6/2015 348,000
Accumulated depreciation 348,000 / 3 years 116,000 √
Carrying amount as at 30/6/2016 232,000

(10√ x ½ = 5 marks)

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 FAR460 – DEC 2016

d.
The cost of the new component, RM50,000, will be capitalized √
As it is estimated that the replacement will further increase the useful life of the machine by
two years √
The old component cost was RM40,000.
The carrying amount of the old component is derecognized/deducted against the carrying
amount of the machine TX5 √
It will be written off in the Statement of Profit or Loss √
The depreciation for the following years needed to be recalculated √
(5√ = 5 marks)
(Total: 25 marks)

QUESTION 3

a. Recognition criteria of:

Provision (based on Para 14 of MFRS 137)

1. An entity has a present obligation ( legal or constructive) as a result of a past event;
2. It is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation; and
3. A reliable estimate can be made of the amount of the obligation.

Contingent liability (based on Para 28 & 86 of MFRS 137)

Unless the possibility of any outflow in settlement is remote, an entity shall disclose for
contingent liability at the end of the reporting period a brief description of the nature of the
contingent liability.
(5 marks)

b.i.
The company has no provision to be recognized. √
As there is no obligation arises yet. √
The company has not started any formal plan for the restructuring. √
The company also still did not inform the relevant parties. √
Since no announcement made to those affected, therefore has not raised a valid expectation in
those that affected. √
(5√ x 1 = 5 marks)

b.ii.
A total provision of RM5,000,000 should be recognized. √
The provision is inclusive of termination costs of RM2,000,000 and directly attributable cost of
closure estimated at RM3,000,000. √
There is a constructive obligation. √
The company has a detailed formal plan for the restructuring √
Notices were sent to the staff of the department or making an announcement about the plan to
those affected. √
Both the notices and the detailed formal plan for the restructuring had raised a valid expectation
in those that affected. √ .
(Any 5√ = 5 marks)

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 FAR460 – DEC 2016

c.
A law suit was filed by the local community on 4 August 2016
This transaction is treated as non-adjusting event after reporting period (MFRS 110). √
No adjustment should be made in the financial statement for the year ended 30 June 2016. √
Nyaman Bhd Bhd should disclose this event in the notes to account. √

Even though there is no environmental legislation, the company has a constructive obligation as
it will take responsibility to clean up all contaminations that it causes. √
Therefore, the transaction should be disclosed as contingent liability (MFRS 137). √

There is a possible obligation and probably will not require an outflow of resources. √
The disclosure should include (i) the nature of the event, and (ii) an estimate of the financial
effect, or a statement that such an estimate cannot be made. √
(Any 5√ = 5 marks)
(Total: 20 marks)

QUESTION 4
Kembangan Bhd
Statement of Cash Flows for the year ended 30 June 2016
RM’000 RM’000
Cash flows from operating activities:
Receipts from customers 21,100 2√
Payment to suppliers (11,700) 4√
Payment to expenses (3,040) 6√
Cash generated from operations 6,360
Interest paid (80) 2√
Taxes paid (2,500) (2,580) 3√
Net cash from operating activities 3,780

Cash flows from investing activities:

Purchase investment property (3,500) 4√
Acquisition of PPE (2,680) 5√
Proceeds from disposal of machinery 1,900 2√
Proceeds from sale of biological assets 390 3√
Net cash from investing activities (3,890)

Cash flows from financing activities:

Proceeds from issue of shares 5,000 √
Redemption payment for debentures (200) √
Dividends paid (690) 3√
Net cash from financing activities 4,110
Net increase in cash and cash equivalent √ 4,000
Cash and cash equivalent at beginning of the year (2,800) √
Cash and cash equivalent at end of the year 3,700-2,500 1,200 2√

(40 √ x ½ = 20 marks)

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 FAR460 – DEC 2016

Receivables
B/d 1,800 Cash 21,100
Sales 21,500 C/d 2,200
Payables
Cash 11,700 b/d 800
c/d 600 Purchase 11,500
COS/ Inventories
b/d 2,500 COS 10,200
Purchases 11,500 c/d 3,800
Expenses
Depreciation 500 b/d 600
Deficit 300 P/L 3,120
Cash 3,040 Gain on sale 300
c/d 300 Gain in FV of IP 120
Interest
Cash 80 b/d 200
c/d 300 P/L 180
Taxation
Cash 2,500 B/d 800
c/d 600 P/L 2,300
Property, plant and equipment
b/d 14,400 Depreciation 500
Invest property 1,120 Deficit revaluation 300
Cash 2,680 Disposal 1,600
c/d 15,800
Investment property
b/d 1,000 PPE 1,120
Increase FV 120 c/d 3,500
Cash 3,500
Biological assets
b/d 1,500 FV loss 110
Cash 390
c/d 1,000
Retained Earnings
Dividend 690 b/d 4,500
c/d 9,400 P/L 5,590

b. There is a negative cash flows from investing activities. /

There were proceeds from disposal of machinery and sale of biological assets //
The proceeds were unable to cover additional acquisition of non-current assets. /
There were purchase of PPE and purchase of investment property //
(3 marks)
There was issuance of new shares. /
The financing activities showed that the company made payments for redemption of
debentures / and dividends. /

Improve in performance could have been financed through new issue of shares. /
(2 marks)
(Total: 25 marks)

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 FAR460 – DEC 2016

END OF SOLUTION

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