Adam & Hisham Tax Services is a partnership formed by Adam and Hisham in 2010. The

partnership provides accounting and tax services to clients in the northern states of Malaysia.

The partners agree to share profits and losses on the ratio of 2:1 respectively. On 1 January

2020 the partners have agreed to admit Rahim in the partnership. The following is the

summarised statement of financial position of the partnership as at 31 December 2019.

Statement of Financial Position

As at 31 December 2019

RM RM

ASSETS

Non-Current Assets

Building 160,000

Equipment 60,000

Vehicles 40,000 260,000

Current Assets

Debtors 60,000

Bank 120,000 180,000

TOTAL ASSETS 440,000

LIABILITIES & OWNERS EQUITY

Non-Current Liabilities

Loan from Adam 10,000

Loan from Finance Company 50,000 60,000

Current Liabilities

Creditors 30,000 30,000

Owners Equity

Capital Accounts

Adam 210,000

Hisham 90,000 300,000

BKAR3033 FINANCIAL ACCOUNTING AND REPORTING III

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Current Accounts

Adam 30,000

Hisham 20,000 50,000

TOTAL LIABILITIES & OWNERS EQUITY 440,000

Additional information:

1. The agreement for the new partnership on 1 January 2020 is as follows:

? Sharing profit and losses at ratio 4:3:3 between Adam, Hisham and Rahim.

? Salary for Rahim is RM1,000 per month.

? 10% interest on capital per annum.

? 6% interest on drawing.

2. On the admission of Rahim in the partnership, the following assets are revalued:

RM

Building 268,000

Equipment 40,000

Vehicles 30,000

Debtor 54,000

3. For the purpose of Rahim's admission, goodwill was valued at three years' purchase of the

average annual profits of the last four years. The annual profits for the last four years are as

follows:

RM

2018 75,000

2017 60,000

2016 55,000

2015 50,000

When Rahim joined the partnership, he contributed RM80,000 cash as capital. All partners

agree to pay for goodwill based on the new profit-sharing ratio.

4. During the year 2020, drawings by partners were RM15,000 (Adam), RM10,000 (Hisham)

and RM12,000 (Rahim).

5. The net profit for the year ended 31 December 2020 is RM80,000. The net profits have

considered the interest on loan by Adam.

BKAR3033 FINANCIAL ACCOUNTING AND REPORTING III

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REQUIRED:

(a) Prepare the revaluation account, and partners' capital account on the admission of Rahim

in the partnership. Show all the workings.

(11 Marks)

(b) Prepare profit appropriation account and current account as at 31 December 2020. Show

all the workings.

(11 Marks)

(c) Assume partners agree to the dissolution of the partnership on 1 January 2021. Referring

to the Partnership Act 1961, explain how the dissolution will be settled.

(3 Marks)

7:52 LTE Done Assignment 1_fa043ffcf8e573... 10. Statements of Financial Accounting Concepts set forth fundamental objectives and concepts that are used by the FASB in developing future standards of financial accounting and reporting. 11. The AICPA created the Accounting Principles Board in 1959 12 The FASB's Codification creates a new set of GAAP. 13. The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles. 14. GAAP is a product of careful logic or empirical findings and is not influenced by political action. 15. The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes auditing and independence standards and rules. 16. The expectations gap is due to the difference between what the public thinks accountants should do and what accountants think they can do. 17. Financial reports in the early 21st century did not provide any information about a company's soft assets (intangibles). 18. Accounting standards are now less likely to require the recording or disclosure of fair value information. 19. U.S. companies that list overseas are required to use International Financial Reporting Standards, issued by the International Accounting Standards Board. 20 Ethical issues in financial accounting are governed by the AICPA. EXERCISESI. The Conceptual Framework for Financial Reporting sets and discusses the objective and fundamentals that serve as the basis for developing financial accounting and reporting standards in different countries. The fundamentals are the underlying concepts of financial accounting that guide the selection of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties. The objective identifies the purpose of financial reporting. With proper reference and citation, complete the following- Required: (total 60 marks) a Identify and discuss the benefits that can be expected to be derived (15 marks) from the Conceptual Framework. b What is the most important quality for accounting information as (5 marks) identified in the Conceptual Framework? Explain why it is the most important. c Assuming that the International Accounting Standards Board (10 marks) (IASB) is considering revising an important accounting standard. Discuss and explain the desired benefit from revising an accounting standard, and some of the possible costs that could result from a revision of an accounting standard and discuss what the IASB will do in order to assess possible benefits and costs of a proposed revision of an accounting standardFINANCIAL ACCOUNTING AND REPORTING ! March 2016 BAC1634 FINANCIAL ACCOUNTING & REPORTING I 27 OCTOBER 2020 iii) CBA Manufacturing Bhd. purchased an equipment for its factory on 1 January 2015. The cost of the equipment was RM340,000 and its economic life was estimated to be ten years with no scrap value. A straight line depreciation method was used to depreciate the equipment. CBA Manufacturing Sdn Bhd made the following expenditures in connection with the equipment: RM Repairs and annual overhaul of the equipment 50,000 Purchase of spare parts 8,000 Replacement of a major part of the equipment which reduced the operating costs 240,000 * The carrying amount of the part being replaced 30,000 Required: Illustrate the accounting treatment for the above equipment in accordance to the MERS1 16 Property, Plant and Equipment. (6 marks) (Total: 25 marks)