08:30 ../ Rail) 2 ACC 1101 (PART B -... 2 : PART B: PROBLEM QUESTIONS (85 MARKS) QUESTION 1 Ayla Sdn. Bhd., a private retail company provides the following unadjusted trial balance dated 31 December 2019. Ayla Sdn. Bhd. Unadjusted Trial Balance at 31 December 2019 RM RM Accounts receivable 148,900 Allowance for doubtful debt 4,490 Accounts payable 130,768 Administrative expense 119,470 8% Long-term loan 150,000 Cash and cash equivalent 96,397 Cost of goods sold 604,783 Finance costs 12,000 Income tax expense 25,000 Intangible assets, net 80,000 Inventory (31 December 2019) 180,060 Ordinary share capital, issued 100,000 shares (1 January 2019) 200,000 Retained earnings (1 January 2019) 81,500 Revaluation reserve (1 January 2019) 60,000 Other income 27,300 Prepaid insurance 8,500 Equipment at cost 232,100 Accumulated depreciation - equipment 38,272 Sales revenue 888,700 Sales discount 3,340 Selling and distribution expense 80,880 Unearned sales revenue 10,400 1,591,430 1,591,430 6 At the end of the accounting period, the following transactions were unrecorded and need to be adjusted in the ledger accounts. 1. Inventory at year end is valued at RM1 72,600. Some of the inventory were damaged before year end. 2. The Cash balance of RM96,397 reflects the balance in the ledger account. The bank informs the company that one customer's cheque, amount, RM1,800 was returned due to insufficient fund. This transaction has not been recorded. 3. During the year, the company issued 10,000 4% Preference shares at RM4 per share to shareholders and all shares were paid in full. 4. The unearned sales revenue of RM 10,400 was received and recorded on 1 December 2019. RM 4,500 of the unearned sales revenue has been earned by year-end 31 December 2019. 5. RM 7,125 of the prepaid insurance has expired into insurance expense. The insurance expense is to be recorded in Administrative expense account. 6. The company confirmed that RM3,900 of its account receivable balance is to be written-off. It is estimated from the company's prior experience that 2% of the updated account receivable balance is uncollectible at year-end. 7. The equipment has an estimated useful life of ten years. Depreciation of the equipment for = O08:30 ../ Rail) 2: ACC 1101 (PART B -... Q : Prepaid insurance 8,500 Equipment at cost 232,100 2/2 Accumulated depreciation - equipment 38,272 Sales revenue 888,700 Sales discount 3,340 Selling and distribution expense 80,880 Unearned sales revenue 10,400 1,591,430 1,591,430 At the end of the accounting period, the following transactions were unrecorded and need to be adjusted in the ledger accounts. 1. Inventory at year end is valued at RM1 72,600. Some of the inventory were damaged before year end. 2. The Cash balance of RM96,397 reflects the balance in the ledger account. The bank informs the company that one customer's cheque, amount, RM1,800 was returned due to insufficient fund. This transaction has not been recorded. 3. During the year, the company issued 10,000 4% Preference shares at RM4 per share to shareholders and all shares were paid in full. 4. The unearned sales revenue of RM 10,400 was received and recorded on 1 December 2019. RM 4,500 of the unearned sales revenue has been earned by year-end 31 December 2019. 5. RM 7,125 of the prepaid insurance has expired into insurance expense. The insurance expense is to be recorded in Administrative expense account. 6. The company confirmed that RM3,900 of its account receivable balance is to be written-off. It is estimated from the company's prior experience that 2% of the updated account receivable balance is uncollectible at year-end. 7. The equipment has an estimated useful life of ten years. Depreciation of the equipment for 2019 has not been recorded. 8. Ordinary dividend, RM0.20 per ordinary share was declared at year-end to be paid in January 2020. No dividend was declared on the preference shares. Required: a) Journalize adjustments 1 to 8 above. (9 marks) b) Prepare a Statement of Profit or Loss and Other Comprehensive Income and a Statement of Changes in Equity for the year ended 31 December 2019, and a Statement of Financial Position as at, 31 December 2019. (19 marks) (Total: 28 marks) E O08:30 .Ill Rail) 2 ACC 1101 (PART B -... Q : QUESTION 2 Sweet Qismina Sdn. Bhd. has the following statement of profit or loss for the year ended 31 December 2019. Statement of profit or loss For the year ended 31 December 2019 RM Sales Revenue 567,410 Cost of goods sold (278,040) Gross Profit 289,370 Depreciation expense (18,840) Selling expenses (98,220) General & administrative expenses 63,040) 109,270 Finance cost (8,340) 100,930 Income tax expense (31,820) Profit for the year 69,110 The company's selected assets and liability accounts for 2018 and 2019 are presented as follows. 31 December 2019 31 December 2018 RM RM Inventory 50,060 44,000 Short term investments 17,440 4.230 Accounts receivable 53,870 50.200 Cash 33,580 54.690 Accounts payable 135,980 138.600 Income tax payable 111,890 82,870 Additional information on year 2019 transactions: 1. Purchased RM1 12,020 plant and equipment. 2. Acquired RM46,300 of intangible assets. 3. Declared and paid RM13,100 of cash dividends. 4. Issued shares for cash in the amount of RM60,000. 5. Repaid a long-term bank loan for RM24,090. Required: a) Prepare Statement of Cash Flow for Sweet Qismina Sdn. Bhd. using the indirect method for the year ended 31 December 2019. (12 marks) b) Write a short explanation (six lines) to the Manager assessing the cash flow position of Sweet Qismina Sdn. Bhd. for the year 2019. (5 marks) (Total: 17 marks) E O08:30 ../ Rail) 2 ACC 1101 (PART B -... 2 : QUESTION 3 Two competing companies, Baba Bhd. and Gapa Bhd. have provided their Statement of Profit or Loss and Statement of Financial Position for the financial year 2019 Statement of Profit or Loss For the year ended 31 December 2019 Baba Bhd. Gapa Bhd. RM RM Sales Revenue 815,000 1,182,500 Cost of goods sold (600,000) (960,000) Gross Profit 215,000 222,500 Depreciation expense 25,000 (12,500) Other operating expenses (90,000) (60,000) Profit for the year 100,000 150,000 Statement of Financial Position As at, 31 December 2019 Baba Bhd. Gapa Bhd. RM RM Property, Plant and Equipment 500,000 250,000 Accumulated depreciation (200,000) (50,000) Carrying amount 300,000 200,000 Inventory 150,000 170,500 Accounts receivable 250,000 200,000 Cash and cash equivalent 50,000 29,500 Total Assets 750,000 600,000 Ordinary share capital 530,000 380,000 Retained earnings 70,000 120,000 Long-term borrowing 100,000 Accounts payable 50,000 100,000 Total Liabilities + Total Equity 750,000 600,000 Selected previous year's (2018) figures are as follows. Accounts receivable for Baba Bhd.; RM270,000 and Gapa Bhd.; RM180,000 . Inventory for Baba Bhd.; RM250,000 and Gapa Bhd.; RM220,500 . Total assets for Baba Bhd.; RM900,000 and Gapa Bhd.; RM700,000 Required: a) Calculate the following ratios for Baba Bhd. and Gapa Bhd. 1. Gross profit ratio Acid-test ratio 2. Net profit margin Days in account receivable 3. Return on assets Inventory turnover ratio 4. Return on equity Debt to asset 5. Current ratio Times interest earned ratio (17 marks) b) Compare and contrast the ratios calculated for Baba Bhd. and Gapa Bhd in part (1) above and comment on the profitability, liquidity, and solvency positions of both companies. (5 marks) O08:30 ..| Rail) 2: ACC 1101 (PART B -... 2 : Total Assets 750,000 600,000 Ordinary share capital 530,000 380,000 Retained earnings 70,000 120,000 2/2 Long-term borrowing 100,000 Accounts payable 50.000 100.000 Total Liabilities + Total Equity 750,000 600,000 Selected previous year's (2018) figures are as follows. Accounts receivable for Baba Bhd.; RM270,000 and Gapa Bhd.; RM180,000 . Inventory for Baba Bhd.; RM250,000 and Gapa Bhd.; RM220,500 Total assets for Baba Bhd.; RM900,000 and Gapa Bhd.; RM700,000 Required: a) Calculate the following ratios for Baba Bhd. and Gapa Bhd. 1. Gross profit ratio Acid-test ratio 2. Net profit margin Days in account receivable 3. Return on assets Inventory turnover ratio 4. Return on equity 10 Debt to asset 5. Current ratio Times interest earned ratio (17 marks) b) Compare and contrast the ratios calculated for Baba Bhd. and Gapa Bhd in part (1) above and comment on the profitability, liquidity, and solvency positions of both companies. (5 marks) (Total: 22 marks) 10 E O08:30 .ill Ruill ACC 1101 (PART B -... 2 : QUESTION 4 Makmur Berhad was formed on 1 January 2009. The company reported the following summarized Statement of Financial Position: Makmur Berhad Statement of Financial Position as at, 1 January 2019 RM Assets Cash 400,000 Other assets 1,000,000 Total assets 1,400,000 Liabilities and Equity Equity Ordinary share capital, 110,000 issued 550,000 8% Preference share capital, 70,000 issued 175,000 Retained earnings 540,000 1,265,000 Liabilities Current liabilities 135,000 Total liabilities and equity 1,400,000 The following transactions occurred during the year ended 31 December 2019 but have yet to be recorded 1) Obtained a loan amounting RM45,000 from Borneo Bank Berhad at 10% per year on 1 February 2019. 2) On 1 March 2019, offered right issue to existing ordinary shareholders, with the right to purchase one share for every 2 shares held, at RM3.20. Market price on the date was RM5.50. All offers were taken up. 3) On 1 July 2019, the company issued 10% RM100,000 par value bonds payable for RM96,000. The bonds pay interest on 31 December annually and will mature in ten years. The annual market rate on the date of issue is 12%. 4) On 1 August 2019, the company paid interim preference dividend of RM7,000. 5) Issued bonus shares (ordinary shares) on 1 September 2019, at a ratio of one for every twenty shares held. Market value per share was RM6.00. The retained earnings account is utilised for this purpose. 6) On 31 December, declared total cash dividend of RM75,000 to both the ordinary and preference shareholders. The dividend has been approved during the annual general meeting and will be paid on 15 January 2020. 7) Profit for the year was RM1 15,000. 8) Accrued interest on bank loan at, 31 December 2019. 9) Paid interest on bonds payable at, 31 December 2019. 11 Required: 1. Journalize the above transactions, 1) to 9). (14 marks) 2. Prepare the Statement of Financial Position of Makmur Berhad as at, 31 December 2019. (4 marks) (Total: 18 marks) O