CONFIDENTIAL 1 AC/FEB 2025/FAR270

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION
ANSWER SCHEME

COURSE : FINANCIAL ACCOUNTING 4

COURSE CODE : FAR270
EXAMINATION : FEBRUARY 2025

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SOLUTION 1

a.
Starway Tech Bhd
Statement of profit and loss and other comprehensive
incomefor the year ended 31 December 2023

RM
Revenue (451,429,000+1,500,000) 452,929,000 √√
Cost of sales (229,978,000+2,320,200) (232,298,200) √√
Gross profit 220,630,800

Other income - Rental 250,000 √

Gain on disposal- Building 18,750 √√√
[1,200,000 – (1,500,000-318,750)]
Administrative costs (88,278,500) W1
Distribution costs (8,722,000) W1
Other operating costs – Compensation costs (200,000) √
Profit from operation 123,699,050

Finance costs (2,835,000) √

Income from investment 594,000 √
FV loss on investment property (400,000) √√
(7,800,000-,7,400,000)

Profit before tax 121,058,050

Tax expense (7,200,000) √

Profit for the year 113,858,050

Other comprehensive income: √

Surplus on revaluation of freehold land √
(11,100,000-10,800,000) 300,000

Total comprehensive income 114,158,050

16√

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Working 1 (W1)

Admin Dist costs Finance

costs costs
RM RM RM
As per Trial Balance 86,207,000√ 8,402,000√ 2,835,000√
Salesman commission 70,000√
Carriage outwards 150,000√
Advertising costs 100,000√
Depreciation on building 562,500√√
(5% x 12m x 6/12) +
[5% x (12m-1.5m) x 6/12]
Depreciation on plant & 960,000√
equipment (9.6mill x 10%)
Director remuneration 549,000√

Total 88,278,500 8,722,000 2,835,000

10√
(26√ x ½ = 13 marks)

Working for depreciation

1) Cost Building (Disposed) 1,500,000
Acc depreciation
(1/3/2019-1/7/2023)
5% x1.5millx 9/12 (2019) 56,250
5% x1.5mill x3 yrs (2020-2022) 225,000
5% x1.5mill x6/12 (1/7/2023) 37,500 (318,750)
Carrying amount 1,181,250.

Gain/loss on disposal

Carrying amount 1,181,250

Proceed on disposal (1,200,000)
Gain on disposal 18,750

2) Depreciation - Building:
1/1/2023-1/7/2023 = 5% x 12m x 6/12 =300,000
1/7/2023-31/12/2023 = 5% x (12m-1.5m) x 6/12= 262,500

Total depreciation on building= 562,500

3) Depreciation-Plant & equipment= 10% * 9,600,000 = 960,000

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b.
Starway Tech Bhd
Statement of changes in equity for the year ended 31 December 2023

Asset
Ordinary Preference revaluation Retained
shares Shares reserve earning
RM RM RM RM
Bal as at 1 Jan 2023 257,000,000√ 20,000,000√ 960,000√ 24,152,000
Prior year
adjustment –utilities 1,800,000√
expenses
Restated balance 25,952,000
Surplus - freehold
property 300,000√
Current year profit √ 113,858,050
Bal as at 31 Dec 2023 257,000,000 20,000,000 1,260,000 139,810,050
(6√ x ½ = 3 marks)
c.
Starway Tech Bhd
Statement of financial position as at 31 December 2023
Non-current assets RM RM
Property, plant and equipment √ 24,716,250
Investment properties (7.8m-0.4m) 7,400,000 √√
Fixed Deposit 101,000,000 √

Currents assets
Bank (250.52m+1.5m+1.2m) 253,220,000 √√√
Inventories (46.404m-2.3202m) 44,083,800 √√
Trade receivable 39,600,000
Less: AFITR (1,980,000) 37,620,000 √
Tax recoverable (7.92m-7.2m) 720,000 √√
TOTAL ASSETS 468,760,050

Equity
Share capital √ 277,000,000
Reserves √ 141,070,050
TOTAL EQUITY 418,070,050
Non-current liabilities
Long-term loan 20,000,000 √
Current liabilities
Trade payable 30,490,000 √√
(32.29m-1.8m)
Provisions for compensation 200,000 √
TOTAL EQUITY AND LIABILITIES 468,760,050
(18√ x ½ = 9 marks)

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d. Notes on PPE
Freehold Building Plant and Total
Land equipment

Cost/valuation RM RM RM RM
As at 1 Jan 2023 10,800,000 12,000,000 9,600,000
Surplus on revaluation 300,000 √
Disposal (1,500,000)√

As at 31 Dec 2023 11,100,000 10,500,000 9,600,000

Accumulated
Depreciation
As at 1 Jan 2023 - 2,400,000 2,880,000
Current year - 562,500 960,000
depreciation√
Disposal (318,750) √
As at 31 Dec 2023 - 2,643,750 3,840,000
Carrying amount 11,100,000 7,856,250 5,760,000 24,716,250

ii. Capital commitments

On 15 April 2023, the company enter into an agreement to acquire a piece of land, with
the total consideration amounting to RM4,030,000 in February 2024. √
(5√ x 1 = 5 marks)
(Total: 30 marks)

SOLUTION 2

A.
1. Hijjany can lease out the building under operating leases. √
2. Owned the building with undetermined future use. √
3. Rented out to another party. √
4. Held the building for long-term capital appreciation. √
5. Any acceptable answer
(Any 2√ x 1 = 2 marks)

B. i. Journal entries

1 July 2023
Dr Investment property √ RM12,500,000
Cr Bank√ RM12,500,000√

Dr Administrative cost√ RM350,000

Cr Bank√ RM350,000

30 June 2024
Dr Investment property√ RM600,000 √
Cr Gain on Fair value change -SOPL √ RM600,000
(8√ x 1/2 = 4 marks)
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ii. Accounting Treatment

• On 1 July 2023, Teguh Holding Bhd should recognize the entire building- 27-
storey building, under MFRS 140 Investment property √ since 21 storeys were
rented out to third parties and the remaining 6 storeys are still vacant and held
to be rented out to third parties√. None of the 27 storeys building is held for
owner-occupied purpose. √
• Furthermore, the ancillary service provided by the company is not significant to
the arrangement as a whole√
• The building is measured initially at RM 12,500,000 √ on the date of acquisition.
• As of 30 June 2024, Teguh Berhad should recognize a gain in fair value change
of RM600,000 (13,100,000-12,500,000) in SOPL √.
(any 5√ x 1 = 5 marks)

C. Accounting treatment

• On 1 July 2024, there was a transfer from PPE to IP√ due to change of use from
owner-occupied building (use as worker dormitory) to being rented out (third party)√.
• The deemed carrying value of the IP was the fair value of RM3,900,000. √
• The difference between the fair value and carrying value was a surplus of
RM500,000√ (3,900,000-3,400,000) to be credited into asset revaluation reserve√.
(5√ x 1 = 5 marks)
(Total: 16 marks)

SOLUTION 3

A. The term "transaction price" refers to the consideration that an entity expects to receive
from a customer in exchange for transferring goods or services√. It represents the
amount agreed upon by the parties in the contract and includes fixed as well as variable
consideration√. Fixed consideration is the amount that is explicitly stated in the
contract√, while variable consideration may include discounts, rebates, bonuses, or
other incentives that are contingent upon future events.√
(4√ x 1 = 4 marks)

B.
i. Five Steps Model:
Step 1: Identify the contract with the customer
On 1 February 2024, Imaan Bhd signed a contract with Beta Electronics√

Step 2: Identify the performance obligations in the contract

Imaan Bhd has two performance obligations, which are:
1. Hosting and maintenance of online storefront√
2. Facilitation of online transactions √
Step 3: Determine the transaction price
The transaction price was RM900,000. √
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Step 4: Allocate the transaction price to each performance obligations

Stand-
Performance alone
obligation price (RM) Allocated TP (RM)
Hosting and
maintenance of
online storefront 800,000 800,000/1,000,000 x 900,000= 720,000√
Facilitation of
online transactions 200,000 200,000/1,000,000 x 900,000= 180,000√
1,000,000 900,000

Step 5: Recognise revenue when a performance obligation is satisfied

Hosting and maintenance

• Revenue from the hosting and maintenance of storefront is recognized over-time at
RM432,000 (RM720,000 x 60%) . √√

Facilitation of online transaction

• Revenue is recognized overtime at RM15,000 (RM180,000/24 month x 2 mths)√ √

(10√ x 1 = 10 marks)

ii. Journal entries to record the above contract for the year ended 30 June 2024

1 May 2024 Dr Contract asset√ 432,000

Cr Revenue – hosting and maintenance √ 432,000

25 June 2024 Dr Bank√ 900,000

Cr Contract asset√ 432,000
Cr Contract liability√ 468,000√

30 June 2024 Dr Contract Liability√ 15,000

Cr Revenue- Facilitation 15,000√
(8√ x ½ = 4 marks)

C. Based on MFRS15, this transaction illustrates a bill and hold arrangement, since all
of the following criteria are met:
i. The reason for the bill-and-hold arrangement must be substantive. √
ii. The product must be identified separately as belonging to the customer. √
iii. The product currently must be ready for physical transfer to the customer. √
iv. The seller cannot have the ability to use or sell the product, or direct it to
another customer. √
(any 3√ acceptable answer x 1 = 3 marks)

• Alya’s Jewel should recognise it as revenue as it met the criteria for a bill-and-
hold arrangement. √

(1√ x 1 = 1 marks)
(Total: 22 marks)
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SOLUTION 4

A. Two examples for each previous year errors and current year errors:
Previous year errors
1- Previous year expenses has been overstated. √
2- Opening inventory include obsolete stock. √

Current year errors

1- Current year sales under/overstated. √
2- Trade receivable in the current year includes bad debts. √
(any acceptable answer 4√ x 1 = 4 marks)

B..i. 1. Retrospectively√
2. Retrospectively√
3. Prospectively√
(3√ x 1 = 3 marks)
ii.
DR CR
1. Dr Account payable - Electron Sdn Bhd√ 150,000
Cr Retained Earnings√ 150,000

2. Dr Retained Earnings√ 80,000

Cr Inventories√ 80,000

3. Dr SOPL - Depreciation 21,600√

[180,000-(4x18,000)]/5
Cr Accumulated Depreciation√ 21,600
(6√ x 1 = 6 marks)

C Adjusted balance of retained earnings as at 1 January 2024

RM
Balance as at 1January 2024 12,600,000
Adjustment:
(+) Admin expense 150,000 √
(-) Inventories (80,000) √
12,670,000 √OF
(3√ x 1 = 3 marks)
(Total:16 marks)
SOLUTION 5

A.
i. Yes, a provision should be recognized. √
ii. Yes, a provision should be recognized. √
iii. No provision should be recognized. √
iv. No provision should be recognized. √

(4√ x 1 = 4 marks)

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B. Azure Bhd

a. Advice on Accounting Treatment in accordance with MFRS 137:

1. Legal claim by customer:

• Recognized as a Provision in the SOFP√.
• There is probable outflow of resources since 75% probability company will
lose the case. √
• The amount can be measured reliably at RM1,200,000. √

2. Legal claim against competitor (RM2,000,000):

• MFRS 137 requires that contingent assets be disclosed only if the inflow of
economic benefits is virtually certain√.
• Since there is no certainty, the claim is disclosed as a contingent asset. √

3. Voluntary clean-up of chemical spill (RM400,000):

• Recognized as a Provision in the SOFP√.
• There is present obligation (constructive) due to past event since the company
voluntarily pledged to address the damage. √
• There is a probable outflow of resources to clean up the damage.
• The cost can be measured reliably at of RM400,000. √
(8√ x 1 = 8 marks)
b.
i. Statement of Profit or Loss (extract) for the Year Ended 31 December 2024:

Expenses: (RM)

Provision for legal claim√ 1,200,000√

Provision for environmental clean-up√ 400,000√

(4√ x ½ = 2 marks)

ii. Statement of Financial Position as at 31 December 2024:

Non-Current Liabilities (RM)

Provision for legal claim√ 1,200,000√

Provision for environmental clean-up√ 400,000√

(4√ x ½ = 2 marks)
(Total: 16 marks)

END OF SUGGESTED SOLUTION

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