CONFIDENTIAL ACIJUN 2016/FAR610/650 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE : ADVANCED FINANCIAL ACCOUNTING AND REPORTING I / ADVANCED FINANCIAL REPORTING COURSE CODE : FAR610/650 EXAMINATION : JUNE 2016 TIME 3 HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of two (2) questions. 2 ‘Answer ALL questions in the Answer Booklet. Start each answer on a new page. 3 Do not bring any material into the examination room unless permission is given by the invigitator. 4 Please check to make sure that this examination pack consists of i) the Question Paper ji) an Answer Booklet ~ provided by the Faculty 5 Answer ALL questions in English, DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 17 printed pages © Hak Cipta Universiti Teknologi MARA, - CONFIDENTIALCONFIDENTIAL 2 ACIJUN 2016/FAR610/650 QUESTION 1 PARTA Membakut Sdn Bhd was incorporated on 15 May 2002, starting the business of food stores on a small scale with two outlets in Beluran and Setiawan. After more than 10 years in operation, the company has successfully expanded its business to operate 50 eateries throughout Sabah. The company has established credible reputation from customers as one of the best eateries offering various types of Sabahan recipes and dishes. Due to the promising opportunity in the food industry business, the company decides to expand its business chain into food manufacturing and processing. In order to raise additional capital for its expansion plan, the company offered its shares for public subscription and became a Public listed company, listed on the Bursa Malaysia on 15 February 2013. The company has also changed its name from Membakut Sdn Bhd to Kundasang Bhd on that date. After the listing exercise was completed, the authorized share capital of the company is RM750 million consisting of 500 million ordinary shares of RM1 each and 125 million 5% preference shares of RM2 each. The issued and fully paid-up capital of the company is RM360 million consisting of 300 million ordinary share capital of RM1 each and 30 million 5% preference shares of RM2 each. Annually, the company diligently prepared its financial statements and as previous years, in 2013, its statements of financial position as at 30 June 2013. Kundasang Bhd (Formerly known as Membakut Sdn Bhd) Statements of Financial Position as at 30 June 2013 RM'000 Non-current assets Property, plant & equipment. 316,000 Intangible assets 3,500 Current assets Inventories 35,000 Trade receivables 45,000 Bills receivables 5,000 Service charge receivable 500 Cash and bank ___190,000_ 595,000 Equity Share capital 360,000 Reserves 130,000 Non-current liabilities Bank loan 41,000 Current liabilities Trade payables 38,000 Bills payables 23,000 Accruals 3,000, 595,000 (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,CONFIDENTIAL, 3 ACIJUN 2016/FAR610/650 Acquisition of companies during the year ended 30 June 2014 The company has raised RM150 million from the listing exercise and utilised the monies mainly for acquisition of new companies. On 1 July 2013, the company acquired Keningau Bhd, a company specialising in food manufacturing and processing through an acquisition of 80% of the ordinary shares. In addition, Kundasang Bhd has also acquired two-third of 6% debentures in Keningau Bhd at par on the same date amounted to RMS50 million. Payment for both acquisitions of shares and 6% debentures in Keningau was made by cash. On the date of acquisition, valuation made over the assets of Keningau Bhd had shown that its land was under-valued by RM3 million compared to its carrying amount in the financial statement and a brand valued at RM1.5 millon was not recognized. This intangible asset has an indefinite useful life and the asset is not amortised. On 1 January 2014, the directors of Kundasang Bhd decided to acquire another food manufacturing and processing company known as Inanam Bhd. Kundasang Bhd acquired 60% ordinary shares and 100% of 5% cumulative preference shares in Inanam Bhd. The 5% cumulative preference shares were acquired at par. Total consideration transferred for both acquisition were by cash of RM19 million and the issue of 50 million ordinary shares in Kundasang Bhd at premium of 10%. Cash consideration was recorded but Kundasang Bhd has not record the recently issued shares due to the acquisition. The company decided to value the non-controlling interest (NCI) in Keningau Bhd at its proportionate shares in the net assets of the subsidiary on the acquisition date. On the other hand, the company decided to value the NCI in Inanam Bhd using the fair value and it was valued at RM20 million on the acquisition date of Inanam Bhd. The company has also decided that no goodwill on consolidation should be impaired for Keningau Bhd and Inanam Bhd On 1 January 2014, Kundasang Bhd has also acquired 5 million ordinary shares out of the 12.5 million ordinary shares of RM1 each of Likas Bhd for cash consideration of RM7 million, a company specializing in marketing, logistics and transportation of food products. Financial statements of Kundasang Bhd, Keningau Bhd and Inanam Bhd The followings are the financial statements of the companies for the year ended 30 June 2014: Statements of Financi: Position as at 30 June 2014 Kundasang Bhd Keningau Bhd Inanam Bhd RM'000 RM'000 RM’000 Non-current assets Property, plant & equipment 304,500 249,000 132,000 Intangible assets 3,500 1,000 3,000 Investment in shares: Keningau Bhd 245,000 Inanam Bhd 19,000 Likas Bhd 7,000 © Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, 4 ACIJUN 2016/FAR610/650 Current assets Inventories Trade receivables Bills receivables Cash and bank Equity Share capital 360,000 190,000 120,000 Reserves 169,500 79,000 4,000 Non-current liabilities 6% debentures - 75,000 - Bank loan 39,000 - 92,000 Current liabilities ‘Trade payables 55,000 20,000 22,500 Bills payables 23,000 10,500 13,000 Accruals 3,000 __——_2,000 2,500 649,500 76,500 254,000 Satements of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2014 Kundasang Bhd Keningau Bhd Inanam Bhd RM’000 RM’000 RM’000 Revenue 236,500 136,500 70,000 Cost of sales 140,000) (75,000) (47,000) Gross profit 96,500 61,500 23,000 Loss on disposal of property, plant & equipment (600) - - Investment income 7,000 - - Interest income 2,000 - - ‘Administration expenses (21,000) (19,500) (11,000) Selling & distribution expenses ____ 20,500) (11,500) __(10,000) 63,500 ,500 2,000 Finance cost __ (3,500) (3,000) (7,000) Profit(loss) before tax 60,000 27,500 (©,000) Tax expense 10,000) (6,000) - Profiti(loss) after tax 50,000 22,500 6,000) (© Hak Cipta Universiti Teknolog! MARA CONFIDENTIALCONFIDENTIAL 5 ACIJUN 2016/FAR610/650 Statement of Changes in Equity of Kundasang Bhd for the year ended 30 June 2014 Ordinary Preference Share Retained shares shares premium profit RM'000 Rw'000 = RM’000.SsRM’000 Balance as at 1 July 2013, 300,000 60,000 30,000 100,000 Profit for the year 50,000 Dividend paid - ordinary (7,500) - preference (3,000) Balance as at 30 June 2014 300,000 60,000 30,000 139,500 Statement of Changes in Equity of Keningau Bhd for the year ended 30 June 2014 Ordinary Preference Share Retained shares shares premium profit Rwrooo = R000. R000 RM’000 Balance as at 1 July 2013 150,000 40,000 15,000 51,000 Profit for the year 22,500 Dividend paid - ordinary (7,500) ~ preference Balance as at 30 June 2014 150,000 40,000 15,000 Statement of Changes in Equity of Inanam Bhd for the year ended 30 June 2014 Ordinary Preference Share Retained shares shares premium profit RM’000 Rw’o00 = RM’000.=S R000 Balance as at 1 July 2013 100,000 20,000 - 10,000 Profit for the year (6,000) Dividend paid - ordinary - - preference (1,000) Balance as at 30 June 2014 —_ 100,000 20,000 = 4,000_ The following information is also provided: 1. The reserves of the three companies are as follows: Share premium — Retained profit Total RM’000 Rw'o00 = RM’000 Kundasang Bhd 30,000 139,500 169,500 Keningau Bhd 15,000 64,000 79,000 Inanam Bhd - 4,000 4,000 (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL