a. The auditor have noted the following subsequent events in the audit of a client. Briefly explain with reasons whether such events should be adjusted or disclosed. The year end of the company is 31 December 2017. The accounts were approved by the directors on 5 March 2018.

i. RM300,000 were receivable from a customer at December 31 2017. Due to weak financial position, specific provision of 25% was made against this customer in the draft accounts. In February 2018, before the accounts were authorized for issue the customer was declared insolvent and nothing was recoverable.

ii. 500 units of an inventory item were valued at unit cost of RM 2,000 at December 31, 2017. In January 2018, the product was sold at RM 1,600 per unit.

iii. The manager is entitled to a commission of 5% of net profit. Net profit was determined in February 2018.

iv. Losses of fixed assets or inventories as a result of a catastrophe such as fire or flood.

b. Differentiate between the issuance of ordinary share, bonus issue, and rights issue.

c. BERJAYA Bhd incorporated on 6 April 2018 and it offered for subscription an initial offering of 50,000,000 ordinary shares of par value RM1 each, at a price of RM5 per share. Applications for 20,000,000 shares were received from institutional investors and applications for 35,000,000 shares from retail investors. Applications closed on 28 February 2018 and all the money due was received. The money received on the oversubscribed shares from the retail investors was refunded. Allotment of shares was completed by 16 May 2018.

REQUIRED:

i. Show the necessary journal entries.

ii. Prepare an extract of Statement of Financial Position.