ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)

PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL

RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

Employee Benefits Questions

Question 1:
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

Question 2:
(a) Employees are the most valuable asset to organisations. Several remuneration packages
and retirement plans have been designated by companies to reward their services and
performance. MFRS 119: Employee Benefits and MFRS 126: Accounting and Reporting by
Retirement Plans are two accounting standards prescribing the reporting of employee benefits
and retirement plans. Despite the existence of these controlling measures, why do we still see
employees committing corporate crime? Discuss.
(15 Marks)

(b) On 1 January 2019 Bluvard Berhad offered defined benefit plans to 10 managers. This
plan will pay RM2.2 million to each of these managers when they retire in 15 years’ time. Bluvard
has appointed an investment company to manage the investment and payment of the benefit
plans. The rate of return of the investment is estimated to remain constant at 5% per annum over
the next 15 years. Bluvard financial year ends every 31 December.

Required:
(i) Compute the amount of initial investment that Bluvard needs to pay to the
investment company for the defined benefit plans. Show your workings.

(ii) Assuming in year 12, 13, 14 and 15, the rate of return on investment is 4%,
3%, 4.5% and 6%, respectively.
 Advise Bluvard what it needs to do to meet its defined benefit plans’
obligations.

 Show the journals to record transactions related to defined benefit

plans on 31 December 2019, 31 December 2030, 31 December
2031, 31 December 2032 and 31 December 2033, respectively.
(10 Marks)
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

INSOLVENT COMPANY AND RECONSTRUCTION QUESTION

QUESTION 1
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

QUESTION 2

Following is Statement of Financial Position of Grizle Berhad:

Grizle Berhad
Statement of Financial Position as at 31 March 2019 (RM'000)

Assets
Non-current
Land 297,000
Property, plant and equipment 160,000
Investment in Kenanga Berhad (subsidiary) 32,000
Investment in Pelangi Berhad (joint venture) 14,000
Investment in financial asset through reserve 18,000
Investment in financial asset fair value through profit and 3,200
loss
Intangibles 1,000
Deferred taxation asset 4,000
529,200
Current
Inventories 4,130
Trade receivables 4,200
Prepayment 500
Contract asset (Asset built for customer yet to be delivered) 1,050
Marketable securities 600
Non-current asset held for sale 320
Bank 250
Total asset 540,000
Liabilities
Non-current
8% Debentures 60,000
Bond 120,000
Bank loan 40,000
Current
Trade payables 5,000
Total liabilities 220,000
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

Equities
Share capital@RM1 600,000
Revaluation reserve 45,000
Fair value reserve 15,000
Accumulated loss (340,000)
Total equities 320,000

On 12 April 2019, Grizle Berhad has obtained special resolution and approval from the
court to undertake capital reduction scheme

Additional information:

i. The board of directors of Grizle Bhd has approved a capital reduction scheme
as follows:
 Ordinary shares were reduced to 50 sen each and the existing
shareholders agreed to take one ordinary shares for every four held.
 20% of the proceed from the new issued shares will be used to settle
bank loan

ii. Accumulated losses are to be written off

iii. Following is the values of Grizle’s assets if the company was to continue and
liquidate, respectively:

Items RM'000 RM'000

As going concern If liquidate
Land 320,000 300,000
Property, plant and equipment 110,500 87,000
Investment in Kenanga Berhad (subsidiary) 50,000 40,000
Investment in Pelangi Berhad (joint venture) 18,000 16,500
Investment in financial asset through 18,000 18,000
reserve
Investment in financial asset fair value 3,200 3,200
through profit and loss
Intangibles 750 520
Inventories 2,960 2,600
Trade receivables 3,950 3,800
Marketable securities 600 600
Non-current asset held for sale 280 220
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

iv. Following items were sold:

 Marketable securities were sold for RM800
 A quarter of the investment in financial asset through reserve were sold
for 50% higher than its liquidation value
 20% of the investment in financial asset through profit and loss were
sold for 80% higher than its liquidation value

Required:

(a) Does Grizle Berhad need to undertake capital restructuring? Provide

explanation for your answer by assessing the financial solvency situation of
Grizle Berhad as at 31 March 2019 (i.e. before it undertook the capital
reduction scheme). Further propose the type of capital restructuring it
should take and the reason why.
(6 Marks)

(b) Prepare Grizle Berhad Statement of Financial Position as at 30 April 2019

(i.e. after it undertook capital reduction.)
(14 Marks)

(c) Explain why it is important for Grizle Berhad to undertake capital

restructuring?
(5 Marks)

(i) Based on Companies Act 2016, discuss the reporting and requirement for
companies’
 Insolvency reporting
 Receivership procedures
 liquidation procedures
(8 Marks)
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

(ii) Following is statement of financial position of Olaf Berhad as at 31 January

2019:

Olaf Berhad
Statement of Financial Position as at 31 January 2019

Assets
Non-current
Land 1,025,000
Property, plant and equipment 1,425,000
Other assets 25,000
2,475,000
Current
Inventories
Trade receivables 450,000
Other assets (include bank balance of RM50,000) 120,000
Total assets 2,925,000
Liabilities
Non-current
5% Debentures 1,200,000
Current
Trade payables 125,000
Total liabilities 1,325,000

Equities
Share capital of RM1 5,000,000
Revaluation reserve 100,000

Accumulated losses (3,500,000)

Total equities 1,600,000

A scheme of reconstruction was agreed by the board of directors of Olaf and all vested
parties. The required approvals were received from the Court on 15 February 2019.

Additional information:
 ACT3129: FINANCIAL ACCOUNTING AND REPORTING IV (SEM 2: 2019/2020)
PAST YEAR’S EXERCISES ON EMPLOYEE BENEFITS, INSOLVENCY AND CAPITAL
RECONSTRUCTION
SUBMIT:

(1) ANSWERS FOR EMPLOYEE BENEFITS LATEST WEDNESDAY 6 MAY 2020

(2) ANSWERS FOR INSOLVENCY AND RECONSTRUCTION LATEST MONDAY 11 MAY 2020

 A new company Winland was formed on 20 February 2019. The new company
constitutions established its capital to comprise of 6.5 % preferences shares and
ordinary shares.
 On 1 March 2019, Winland acquired all the assets of Olaf for following payments:
 A 8% debentures of RM1,200,000 was issued to compensate the claims of
debentures in Olaf.
 RM70,000 trade payables are paid and the remaining in 8% debentures
 The ordinary shareholders in Olaf will receive two shares in Winland for
every five shares held in Olaf. The ordinary shares in Winland have a value
of RM1.50 each.
 All the non-current assets in Olaf are acquired at price of 40% higher than
its book value.
 All the current assets (except bank balance) in Olaf are acquired at 90% of
its book value.

Required:

(a) Close the accounts of Olaf Berhad.

(12 Marks)

(b) Prepare Statement of Financial Position of Winland Berhad as at 1 March 2019

(5 Marks)