Hijau Merimbun Bhd (HMB), a company established in Penang, Malaysia since year 2010. The principal activity of the company is distributing cosmetics and health supplements. The outbreak of COVID-19 pandemic has seriously impacted the Malaysian economy and the world. The impose of Movement Control Order (MCO) in early 2020 and the prolongation in the Recovery Movement Control Order (RMCO) by the Malaysian govemment in 2021 has impacted the domestic sales and export activities of industries like constructions materials, motor vehicles, food product and others. HMB being one of the affected companies, had to temporarily elose its operations in August 2020 due to the MCO and experienced in huge drop in its sales. The company continued its operation at its half capacity in June 2021 and fully in January 2022. It is now in the recovery process with the help of the government of Malaysia. During the temporary closure of the operation, the company incurred fixed expenditure like rental, utilities, salaries, and others. Besides, to reduce expenses, the company also had to lay off many highly paid employees including the company's accountant. The company's accounts close every 30 September. HMB reported a huge loss in the last two consecutive years. Mr Jumali Khan has just been appointed as an accountant in October 2022. He did not have much experience as compared to the previous accountant of HMB. He was provided with the Unadjusted Trial Balance as of 30 September 2022 and asked to look on it and other information related to the performance of the company in previous years as preparation for the management meeting with the CEO of the company, Mr Jay Salam. Other related information: 1. Office buildings are depreciated and 5% per annum and other assets are at 10% per annum. All depreciations are using the straight-line method. 2. The bank loan amounted to RM1,500,000 has been taken since January 2020 at the interest rate of 5% per annum. The company was allowed for a six-month moratorium in 2020. As for the current year, the company has not been able to make any payments including interest since June 2022. 3. The company purchased an insurance policy starting January 2022 for 12 months. During the meeting, Mr Jay Salam has asked the accountant not to make any adjustment for interest on bank loan for the current reporting period and only be recorded when the payment has been made to the bank. Mr Jumali Khan were also informed that the sales revenue included RM99,000 pre-order sales that expected to be completed in November 2022. The CEO insisted that the amount should be taken as the revenue in the year of the receipt. The COVID-19 pandemic and resulting economic fallout caused significant hardship to the whole community. The company is aware that it may not be able to collect the whole amount owed by the customers. The CEO has concluded that this unfavourable condition would affect the financial position of the company, and this would "add salt to the sore" if it is accounted in the current year reporting. Thus, the allowance for doubtful debt at the rate of 4% from the total receivables would only be included in the next reporting period. In March 2022, a customer has filed a lawsuit claiming RM500,000 against the company because of the adverse effects she faced after consuming the cosmetics product purchased from the company. According to the lawyer, the company has a high probability of losing the case and most probably need to pay such a huge amount to the plaintiff. The company is currently in negotiations to collaborate with a leading cosmetics manufacturer. Thus, the CEO of the company instructed Mr Jumali Khan not to include any information related to the court case in the company's financial statements to maintain a good reputation of the company. In the closing speech of the meeting, the CEO indicated that the company has shown significant losses in the last two years, he anticipated that decisions in the meeting could reduce the impact of losses on the company's performance for the current and future years. 1. Mr Jumali Khan is your friend, he is asking for your help to: (CTPS question, refer rubric for marking) i. Identify the problem faced by Mr Jumali Khan. (Problem identification) ii. Analyse the problem by referring to the Conceptual Framework for Financial Reporting. (Problem analysis) iii. Help Mr Jumali Khan in deciding the best way of preparing the financial statement according to the Conceptual Framework for Financial Reporting. (Generation of solution, evaluation and decision making) Hijau Merimbun Bhd (HMB), a company established in Penang, Malaysia since year 2010. The principal activity of the company is distributing cosmetics and health supplements. The outbreak of COVID-19 pandemic has seriously impacted the Malaysian economy and the world. The impose of Movement Control Order (MCO) in early 2020 and the prolongation in the Recovery Movement Control Order (RMCO) by the Malaysian govemment in 2021 has impacted the domestic sales and export activities of industries like constructions materials, motor vehicles, food product and others. HMB being one of the affected companies, had to temporarily elose its operations in August 2020 due to the MCO and experienced in huge drop in its sales. The company continued its operation at its half capacity in June 2021 and fully in January 2022. It is now in the recovery process with the help of the government of Malaysia. During the temporary closure of the operation, the company incurred fixed expenditure like rental, utilities, salaries, and others. Besides, to reduce expenses, the company also had to lay off many highly paid employees including the company's accountant. The company's accounts close every 30 September. HMB reported a huge loss in the last two consecutive years. Mr Jumali Khan has just been appointed as an accountant in October 2022. He did not have much experience as compared to the previous accountant of HMB. He was provided with the Unadjusted Trial Balance as of 30 September 2022 and asked to look on it and other information related to the performance of the company in previous years as preparation for the management meeting with the CEO of the company, Mr Jay Salam. Other related information: 1. Office buildings are depreciated and 5% per annum and other assets are at 10% per annum. All depreciations are using the straight-line method. 2. The bank loan amounted to RM1,500,000 has been taken since January 2020 at the interest rate of 5% per annum. The company was allowed for a six-month moratorium in 2020. As for the current year, the company has not been able to make any payments including interest since June 2022. 3. The company purchased an insurance policy starting January 2022 for 12 months. During the meeting, Mr Jay Salam has asked the accountant not to make any adjustment for interest on bank loan for the current reporting period and only be recorded when the payment has been made to the bank. Mr Jumali Khan were also informed that the sales revenue included RM99,000 pre-order sales that expected to be completed in November 2022. The CEO insisted that the amount should be taken as the revenue in the year of the receipt. The COVID-19 pandemic and resulting economic fallout caused significant hardship to the whole community. The company is aware that it may not be able to collect the whole amount owed by the customers. The CEO has concluded that this unfavourable condition would affect the financial position of the company, and this would "add salt to the sore" if it is accounted in the current year reporting. Thus, the allowance for doubtful debt at the rate of 4% from the total receivables would only be included in the next reporting period. In March 2022, a customer has filed a lawsuit claiming RM500,000 against the company because of the adverse effects she faced after consuming the cosmetics product purchased from the company. According to the lawyer, the company has a high probability of losing the case and most probably need to pay such a huge amount to the plaintiff. The company is currently in negotiations to collaborate with a leading cosmetics manufacturer. Thus, the CEO of the company instructed Mr Jumali Khan not to include any information related to the court case in the company's financial statements to maintain a good reputation of the company. In the closing speech of the meeting, the CEO indicated that the company has shown significant losses in the last two years, he anticipated that decisions in the meeting could reduce the impact of losses on the company's performance for the current and future years. 1. Mr Jumali Khan is your friend, he is asking for your help to: (CTPS question, refer rubric for marking) i. Identify the problem faced by Mr Jumali Khan. (Problem identification) ii. Analyse the problem by referring to the Conceptual Framework for Financial Reporting. (Problem analysis) iii. Help Mr Jumali Khan in deciding the best way of preparing the financial statement according to the Conceptual Framework for Financial Reporting. (Generation of solution, evaluation and decision making)