BKAR 1013 FINANCIAL ACCOUNTING & REPORTING 1

MINI CASE 2
Presentation of Financial Statement

QUESTION 1 (24 MARKS: 72 MINUTES)

Fortune Future Oriental Company is a telecommunication company. Below is a list of

account balances of the company at 31 December 2016.

Accounts RM
A Account receivables 45,691
Accounts payable 15,390
Accumulated depreciation – buildings 10,500
Accumulated depreciation - equipment 4,915
Allowance for doubtful debts 300
B Bonds payable 250,750
Buildings 571,950
Bad debt expense 300
C Cost of goods sold 356,730
Cash 547,610
D Depreciation expense – building 3,240
Depreciation expense – equipment 2,500
E Equipment 210,000
G Gain on sale of land 45,650
Gain on revaluation of properties 12,350
Goodwill 25,115
I Inventory 229,979
L Land held for future use 67,000
M Maintenance and repair expenses 4,980
N Notes payable 81,000
O Office expense 4,809
P Property tax expense 700
Prepaid insurance 110,222
R Rent revenue 24,000
Retained earnings 380,300
Reserve 352,250
S Sales revenue 934,675
Sales discounts 2,100
Sales returns and allowance 490
Salaries and wages expenses 10,556
Sales commissions 760
Share capital 115,402
T Travel expense (salesperson) 300
Translation of foreign operations 2,450

Additional information:

1. 25% of the notes payable are due next year.

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2. On 30 December, Fortune Future Oriental receives cash advances of RM5,500

from Dragon Villa. Fortune Future Oriental is required to provide services
relating to internet access surrounding the Dragon Villa on February 2017. The
transaction, however, has not been recorded by the accountant.
3. Fortune Future Oriental returns defect cables bought from supplier. The cost of
the cables is RM1,500. In return, the company receives full cash refund. The
accountant has not done any adjustment to the relevant accounts.
4. Income tax expense for 2016 is RM34,900.
5. 70% of the bonds payable will be due on 2020. The remaining balance will be
due on June 2017.
6. No dividends have been declared.

REQUIRED:

a. Prepare a Statement of Comprehensive Income for Fortune Future Oriental.

(10 Marks)
b. Prepare a Statement of Financial Position for Fortune Future Oriental.
(14 Marks)

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ANSWER:

Fortune Future Oriental

Statement of Comprehensive Income
For the year ended 31 December 2016

RM
Sales revenue 934,675 /
(-) Sales discount (2,100) /
Sales returns and allowance (490) /
Net sales 932,085
(-) COGS (356,730) /
Gross profit 575,355 /
(-) Expenses
Depreciation expenses- building (3,240) /
Depreciation expenses – equipment (2,500) /
Bad debt expenses (300) /
Maintenance and repair expenses (4,980) /
Office expenses (4,809) /
Sales commission (760) /
Travel expense (300) /
Salary and wages (10,556) /
Other income & expenses:
Rental revenue 24,000 /
Property tax expense (700) /
Gain on sale of land 45,650 /
Profit before income tax 616,860
Income tax expense (34,900) /
Profit after tax 581,960

Other comprehensive income:

Gain on revaluation of properties 12,350 /
Translation of foreign operations 2,450 /
Total comprehensive income for the 596,760 19/
year
19/* 0.5 = 9.5
+ Format = 0.5
Total = 10.00

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b)

Fortune Future Oriental

Statement of Financial Position
As at 31 December 2016
Assets:
Current assets:
Cash 547,610 + 1500 + 5500 554,610 ///
Account receivable 45,691
(-) Allowance for doubtful debts (300) 45,391 //
Inventory 229,979 – 1,500 228,479 //
Prepaid insurance 110,222 /
Total current assets 938,702
Non-Current assets:
Building 571,950
(-) accumulated depreciation (10,500) 561,450 //
Equipment 210,000
(-) Accumulated depreciation (4,915) 205,085 //
Goodwill 25,115 /
Land 67,000 /
Total non-current assets 858,650
TOTAL ASSETS: 1,797,352 /
Liabilities:
Current liabilities
Account payable 15,390 /
Bonds payable 75,225 /
Unearned service revenue 5,500 /
Notes payable 20,250 /
Total current liabilities 116,365 /
Non-Current liabilities:
Bonds payable 175,525 /
Notes payable 60,750 /
Total non-current liabilities 236,275
Total liabilities 673,840
Equity:
Retained earnings (380,300+581,960) 962,260 ///
Share capital 115,402
Reserve (352,250+14800) 367,050 //

TOTAL Liabilities & Equities 1,797,352

28*0.5=14

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QUESTION 2

Presented below is the trial balance of Perkasa Bhd at 31 December 2015.

Perkasa Bhd
Trial balance
31 December 2015
Debit Credit
RM RM
Purchase discounts 10,000
Cash 189,700
Accounts receivable 105,000
Rent revenue 18,000
Retained earnings 160,000
Salaries and wages payable 18,000
Sales revenue 1,100,000
Notes receivable 110,000
Accounts payable 49,000
Accumulated depreciation-equipment 28,000
Sales discounts 14,500
Sales returns and allowances 17,500
Notes payable 60,000
Selling expenses 232,000
Administrative expenses 99,000
Share capital-ordinary 300,000
Income tax expense 53,900
Cash dividends 45,000
Allowances for doubtful accounts 5,000
Supplies 14,000
Freight-in 20,000
Land 70,000
Equipment 140,000
Bonds payable 100,000
Gain on sale of land 20,000
Accumulated depreciation-buildings 18,600
Inventory 89,000
Buildings 98,000
Revaluation of land and buildings 21,000
Purchases 610,000
Total 1,907,600 1,907,600

A physical count of inventory on 31 December 2015 resulted in an inventory amount of

RM64,000.

REQUIRED:

Prepare statement of profit or loss and other comprehensive income (one-statement format) for
Perkasa Bhd for the year ended 31 December 2015. You are suggested to follow a format from a
recent statement of profit or loss and other comprehensive income of any Malaysian listed
company.

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ANSWER

Perkasa Bhd
Statement of profit or loss and other comprehensive income
For the year ended 31 December 2015

Revenue (RM1,100,000 – RM14,500 – RM17,500) .............................. RM1,068,000

Cost of goods sold* ................................................................................ 645,000
Gross profit 423,000
Selling expenses ..................................................................................... RM232,000
Administrative expenses ........................................................................ 99,000 331,000
92,000
Other income and expense
Gain on sale of land.................................................................. 20,000
Rent revenue............................................................................. 18,000 38,000
Profit before income tax......................................................................... 130,000
Income tax ................................................................................ 53,900
Profit for the year ................................................................................... 76,100

Other comprehensive income:

Revaluation of land and buildings 21,000
………………………… RM 97,100
Total comprehensive income/(loss) for the year
______________________________________________________
_
*Cost of goods sold: Can be verified as follows:
Merchandise inventory, 1 Jan .............................................................. RM 89,000
Purchases RM610,000
Less: Purchase discounts..................................................................... 10,000
Net purchases ....................................................................................... 600,000
Add: Freight-in................................................................................... 20,000 620,000
Merchandise available for sale............................................................. 709,000
Less: Merchandise inventory, 31 Dec. ............................................... 64,000
Cost of goods sold ............................................................................. RM 645,000

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QUESTION 3

Presented below is the trail balance of Serasi Bhd at 31 January 2016.

Serasi Bhd
Trial balance
31 January 2016
Debit Credit
RM RM
Cash 197,000
Sales revenue 7,900,000
Other investment (short-term) 153,000
Cost of goods sold 4,800,000
Long-term investment in bonds 299,000
Investment in associates 277,000
Notes payable (short-term) 90,000
Accounts payable 455,000
Selling expenses 2,000,000
Investment income 63,000
Land 260,000
Buildings 1,040,000
Dividend payable 136,000
Accrued liabilities 96,000
Accounts receivable 435,000
Accumulated depreciation-buildings 352,000
Allowance for doubtful accounts 25,000
Administrative expenses 900,000
Interest expense 211,000
Inventory 597,000
Provision for retirement benefits (long-term) 80,000
Notes payable (long-term) 900,000
Equipment 600,000
Bonds payable 1,000,000
Accumulated depreciation-equipment 60,000
Franchises 160,000
Share capital – ordinary (par RM5) 1,000,000
Treasury shares 191,000
Patents 195,000
Retained earnings 78,000
Accumulated other comprehensive income 80,000
Total 12,315,000 12,315,000

REQUIRED:

Prepare statement of financial position for Serasi Bhd for the year ended 31 January 2016. You
are suggested to follow a format from a recent statement of financial position of any Malaysian
listed company. Ignore income tax. Show your workings for the calculation of ending retained
earnings.

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ANSWER

Serasi Bhd
Statement of Financial Position
As at 31 January 2016
Non-current assets
Property, plant, and equipment 1,488,000
Investments in bonds ..........................................................
RM299,000
Investments in associates ................................................... 277,000
Intangible assets 355,000
Total non-current assets ...................................... 2,419,000

Current assets
Inventories .......................................................................... 597,000
Accounts receivable ........................................................... 410,000
Other investment ................................................................ 153,000
Cash 197,000
Total current assets ............................................. 1,357,000
Total assets ........................................................... RM3,776,000

Equity and Liabilities

Equity
Share capital—ordinary (RM5 par) ...................................................
RM1,000,000
Retained earnings* .............................................................................
130,000
Accumulated other comprehensive income ....................................... 80,000
Less: Treasury shares ........................................................................
191,000
Total equity ......................................................................... RM1,019,000

Non-current liabilities
Bonds payable ....................................................................................
RM1,000,000
Long-term notes payable....................................................................
900,000
Provision for retirement benefits ......................................................
80,000
Total non-current liabilities..................................................
1,980,000

Current liabilities
Short-term notes payable .............................................................
RM 90,000
Accounts payable .........................................................................
455,000
Dividends payable ........................................................................
136,000
Accrued liabilities ........................................................................
96,000
Total current liabilities .........................................................
777,000
Total liabilities .................................................................... 2,757,000
Total equity and liabilities ............................................................... RM3,776,000

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Note to account:

1. Property, plant, and equipment

Land .............................................................................. 260,000
Buildings .......................................................................
RM1,040,000
Less: Accum. depreciation ........................................... 352,000 688,000
Equipment .................................................................... 600,000
Less: Accum. depreciation .......................................... 60,000 540,000
Total property, plant, and equipment ...................... 1,488,000

2. Intangible assets

Franchise ...................................................................... 160,000

Patent ............................................................................ 195,000
Total intangible assets ............................................ 355,000

3. Accounts receivable ..................................................... 435,000

Less: Allowance for doubtful
accounts ............................................................... 25,000 410,000

*Computation of Retained Earnings:

Sales ..................................................................................................
$7,900,000
Investment income ............................................................................
63,000
Cost of goods sold .............................................................................
(4,800,000)
Selling expenses ................................................................................
(2,000,000)
Administrative expenses ...................................................................
(900,000)
Interest expense .................................................................................
(211,000)
Net income ........................................................................................
$ 52,000

Beginning retained earnings .............................................................

$ 78,000
Net income ........................................................................................
52,000
Ending retained earnings...................................................................
$ 130,000

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Alternative:

Serasi Bhd
Statement of Financial Position
As at 31 January 2016
Assets
Non-current assets
Lo ng-term investments
Investments in bonds..................................................... RM299,000
Investments in associates .............................................. 277,000
Total long-term investments ................................. RM 576,000
Property, plant, and equipment
Land .............................................................................. 260,000
Buildings .......................................................................
RM1,040,000
Less: Accum. depreciation ........................................... 352,000 688,000
Equipment .................................................................... 600,000
Less: Accum. depreciation .......................................... 60,000 540,000
Total property, plant, and equipment ...................... 1,488,000

Intangible assets
Franchise ....................................................................... 160,000
Patent............................................................................. 195,000
Total intangible assets ............................................. 355,000
Total non-current assets ....................................... 2,419,000

Current assets
Inventories..................................................................... 597,000
Accounts receivable ...................................................... 435,000
Less: Allowance for doubtful
accounts ................................................................ 25,000 410,000
Other investment ........................................................... 153,000
Cash............................................................................... 197,000
Total current assets .............................................. 1,357,000
Total assets............................................................ RM3,776,000

Equity and Liabilities

Equity
Share capital—ordinary (RM5 par) ............................................. RM1,000,000
Retained earnings* ....................................................................... 130,000
Accumulated other comprehensive
income ...................................................................................... 80,000
Less: Treasury shares .................................................................. 191,000
Total equity ......................................................................... RM1,019,000

Non-current liabilities
Bonds payable ..............................................................................
RM1,000,000
Long-term notes payable..............................................................
900,000
Provision for retirement benefits ................................................
80,000
Total non-current liabilities.................................................. 1,980,000

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Current liabilities
Short-term notes payable .............................................................
RM 90,000
Accounts payable .........................................................................
455,000
Dividends payable ........................................................................
136,000
Accrued liabilities ........................................................................
96,000
Total current liabilities ......................................................... 777,000
Total liabilities .................................................................... 2,757,000
Total equity and liabilities ............................................................... RM3,776,000

*Computation of Retained Earnings:

Sales ..................................................................................................
$7,900,000
Investment income ............................................................................
63,000
Cost of goods sold .............................................................................
(4,800,000)
Selling expenses ................................................................................
(2,000,000)
Administrative expenses ...................................................................
(900,000)
Interest expense .................................................................................
(211,000)
Net income ........................................................................................
$ 52,000

Beginning retained earnings .............................................................

$ 78,000
Net income ........................................................................................
52,000
Ending retained earnings...................................................................
$ 130,000

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QUESTION 4

Partial Statement of Profit or Loss and Other Comprehensive Income for the year ended
31 December 2016 of AL Bhd as follow:

2016 2015
RM’000 RM’000

Equity of AL Bhd as at 31 December 2014 show following balances:

RM‘000
Share capital 54,949
Share premium 1,295
Revaluation reserve 386
Fair value adjustment reserve 334
Foreign translation reserve 392
Retained profits 99,286

Dividend paid by AL Bhd in 2015 and 2016 were RM5 million and RM7 million
respectively.

REQUIRED:

Prepare Statement of Changes in Equity for AL Bhd for the year ended 31 December
2016 according to MFRS 101 Presentation of Financial Statements.

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ANSWER:

Statement of Changes in Equity

For the year ended 31 December 2016

Share Share Revaluation Fair value Foreign Retained Total

capitalpremium reserve adjustment translation profits equity
reserve reserve
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2015
Balance at begining 54,949 1,295 386 334 392 99,286 156,642
Total comprehensive - - - 108 137 12,371 12,616
income
Dividend (5,000) (5,000)
Balance at end 54,949 1,295 386 442 529 106,657 164,258
2016
Balance at begining 54,949 1,295 386 442 529 106,657 164,258
Total comprehensive - - - 8 928 14,211 15,147
income
Dividend (7,000) (7,000)
Balance at end 54,949 1,295 386 450 1,457 113,868 172,405

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