INTI Hae Intetnational University FINAL Examination Paper (COVER PAGE) Session : August 2012 Programme : Bachelor of Accountancy (Hons Course : ACC3201 Financial Reporting 1 Date of Examination: 11 December 2012 Time 7 1600 - 1910 Reading Time : _ 10 minutes Duration 7 3 Hours 10 minutes Special Instructions: This paper consists of TWO (2) sections. Answer ALL the questic ‘questions in, SECTION B in the answer booklet provided Materials permitted Non- programmable Calculator Materials provided Examiner(s) : Mary Mathews Moderator : Zainal Anuar This paper consists of 7 printed pages, including the cover page.iv. ve vi, ACC 3201 (F)/ Page 2 of 6 De. BES 992 and was Land was revalued on 31 December 2010 to RM 95,000, There were no previous revatuations for land, RM120,000. The building had originally cost RM 150,000 o revalued on 31 December 2002, Motor vehicles are depreciated at 25% per annum on cost. A full year’s depreciation is charged in the year of acquisition. No depreciation is charged in the year of disposal. In June 2010, a distribution vehicle which had cost RM 24,000 in February 2007 was sold for RM15,000, This amount was debited to the bank account and credited to a disposal account, but no further entries have yet been made with regard to this disposal. Depreciation of buildings should be split 70:30 between administrative expenses and distribution costs. Depreciation of vehicles should be split 40:60 between administrative expenses and distribution costs, Included in the trial balance figures for plant and equipment is plant that had cost RM 20 million and had accumulated depreciation of RM 12 million. Following a review of the company’s operations this plant was made available for sale during the year. Negotiations with a broker have concluded that a realistic selling price of this plant will be RM 6.5 million and the broker will charge a commission of 8 % of the selling price. Plant is depreciated at 15% per annum using reducing balance method. ‘The investments at fair value through profit and loss had a fair value of RM 18,200 on 31 December 2010, There were no purchases or disposals of any of these investments during the year. The development expenditure relates to the capitalized cost of developing a product called Robig. It had an original estimated life of five years. Production and sales of the Robiq started in January 2009. A review of the sales of Robiq in late December 2010, showed them to be below forecast and an impairment test concluded that the fair value of development cost at 31 December 2010 was only RM 8 million. The balance on the income tax account is the balance remaining fiom the settlement of the estimated income tax charge for the year ended 31 December 2009. The income ‘ax charge for the year has been estimated at RM 6 million, Required: Prepare an income statement for the year ended 31 December 2010 and a balance sheet as at that date in accordance with FRS 101 Presentation of Financial Statement. (Show all relevant workings) (25 marks)ACC 3201 (F)/ Page 4 of 6 On I January 2009 the land was revalued at RM 400,000 and the buildings were revalued at RM 450,000, The company decided to incorporate these valuations into its accounts. The previous estimates of the building useful life and residual value remain unchanged. On 31 December 201 1, the land was revalued at RM 380,000 and the buildings were revalued at RM 360,000. The company decided to incorporate these valuations into its accounts, ‘The previous estimates of the building useful life and residual value remain unchanged Required: (i) Prepare the journal entries for the revaluation of Theta Ltd frechold property on 1 January 2009 and the balance sheet extract as at 31 December 2009. (6 marks) (ii) Prepare the journal entries for the revaluation of Theta Ltd freehold property on 31 December 2011 and the balance sheet extract as at date. (marks) Q5 marks) Section B: Answer any TWO questions Question 3 (@) FR 136 Impairment of Assets, issued by the Malaysian Accounting Standards Board became effective on 1 January 2006. The Standard puts in place accounting for impairment of assets and defines impairment losses as the amount by which the carrying amount of an asset exceeds its recoverable amount. Required: Describe the indications when an asset may be considered to be impaired in accordance with INRS 136 Impairment of Assets. (12 marks) (6) An asset (which has never been revalued) has a canying amount of RM100,000. The asset is being depreciated on a straight line basis, with a remaining useful life of three years and a residual value of RM10,000, The asset is expected to generate net cash inflows of RM20,000 per year for the next three years and then to be sold for RM10,000. Disposal costs are expected to be negligible. At present, the asset could be sold for RM$0,000. Disposal cost would be RM2,000, Required: (Assuming a discount rate of 10% and that all cash flows occur at the end of the year concerned, determine the asset’s value in use, (4 marks) (ii) Calculate the amount of the impairment loss which has occurred and explain how this should be accounted for. (5 marks) (iii) Calculate the amount of depreciation that should be charged in relation to the asset for each of the next three years, assuming that the straight line method will continue to be used.ACC 3201 (F)/ Page 6 of 6 Part C State and explain FOUR (4) funetions and powers of Financial Reporting Foundation (PRE) (4 marks) (Lotal: 25 marks) Question 5 The ASB’s Statement of Principles for Financial Reporting sets out the concepts that underlie the preparation and presentation of financial statements for external users. The qualitative characteristics of financial information are Required: @ Explain the purpose of an accounting conceptual framework. @ marks) (6) Explain the four qualitative characteristics of financial information that are currently inchided in the Statement of Principles. (8 marks) © Discuss the arguments for the accounting profession having agreed accounting standards as a basis for preparing financial statements, (10 marks) @ Discuss whether it is ever acceptable to depart from an accounting standard (4 marks) (Total: 25 marks) The End MaryAug 20120F