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Wae Agricultural Bhd, is an agriculture company involved in plantations business as well as operating a rabbit farm for breeding and maturing rabbit for future selling purposes. Below is the trial balance of the company as at 31 December 2019. DR RM'000 CR RM'000 435,000 252,500 25,680 95,230 29,010 8,500 87,500 70,200 1,000 42,750 38,500 35,000 25,000 Revenue Cost of sales Distribution costs Closing inventories - 31 December 2019 Administrative expenses Finance costs Land valued at 1 January 2019 Building at cost Biological assets Plant and machinery at cost Motor vehicles at cost Research and Development expenditure Investment Property Acc. depreciation and amortisation as at 1 January 2019: - Building Plant and machinery - Motor vehicles - Development expenditure 5% bank loan Bank Foreign loan Tax recoverable as at 31 December 2018 Interim dividend paid Ordinary shares of RM1 each Retained earnings - 1 January 2019 Asset revaluation reserve Tax paid Trade payables Trade receivables Interest on loan 5,250 22,500 12,500 7,000 32,000 11,285 8,200 100 5,750 111,000 89,450 6,000 3,200 19,660 15,755 1.600 748,560 748.560 2. The land is revalued every two years and the balance in the asset revaluation reserve is related to the previous revaluation. Current year revaluation showed a decrease of RM9,000,000 in the value of the land and this has not been recorded. 3. Wae Agricultural Bhd acquired a building for RM24,000,000 on 1 July 2019. Legal and other expenses incurred amounted to RM1,000,000. The building has ten floors and nine of the floors are rented out at market rental of RM40,000 per month and one floor is used by Wae Agricultural Bhd. The fair value of the property as at 31 December 2019 was RM29,000,000. The company has adopted the fair value model for which land and building qualify as investment property. The only entry made was during the acquisition on 1 July 2019. 4. On 1 January 2019, an item of plant was disposed for RM3,000,000 cash. The proceeds have been treated as sales revenue by Wae Agricultural Bhd. The plant is still included in the above trial balance figures at its cost of RM10,000,000 and accumulated depreciation of RM5,000,000 (to the date of disposal). It is the policy of the company to depreciate non-current assets using the straight line method. Their expected useful lives are as follows: 5. Buildings Plant & Machinery Motor Vehicles - 50 years - 10 years - 5 years 6. Depreciation charges for all assets for the year ended 31 December 2019 have not been made. Depreciation on building and motor vehicles are to be treated as administrative expense, while depreciation on plant and machinery is treated as part of cost of sales. The research and development expenditure relate to the completed development expenditure of RM30,000,000 as at 1 January 2019 and also RM5,000,000 on new research and development project. Out of these RM5,000,000, the company has incurred RM1,000,000 for new research activity from 1 January to 30 April 2019 while development costs of RM500,000 per month were incurred from 1 May to 31 December 2019. This new project is still at a development stage and is expected to be successful. All development costs capitalized are amortized at 10% per annum using straight-line method, and charged to cost of sales. 7. 8. A debtor ( Muya Sdn Bhd) who owed Wae Agricultural Bhd RM250,000 was declared a bankrupt. For every RM10 owed only RM7 could be collected from this debtor. Therefore, the company decided to write-off the bad debts (on amount uncollectible from Muya Sdn Bhd). Wae Agricultural Bhd is being sued by a customer for RM1,500,000 for breach of contract over a cancelled order. Wae Agricultural Bhd has obtained legal opinion that there is a 10% chance that Wae Agricultural Bhd will lose the case. The unrecoverable legal costs of defending the action are estimated at RM125,000 and this has not yet been provided for as the legal action will not go to court until next year. 9. The foreign loan of RM8,200,000 is in respect of a borrowing of SD3,280,000 raised on 1 April 2019. On 1 August 2019, a payment of SD1,200,000 was made and on that date the spot rate was RM2.6:SD1. The spot rate on 31 December 2019 was RM2.40:SD1. The only entry made for the loan was on 1 April 2019. 10. The Company's biological assets consist of two thousands 2-years old rabbits which were purchased on 1 January this year. The Company was in the early stage of breeding and maturing its rabbits and would expect to sell its rabbits in 3 years time. On 1 July 2019, the company bought additional five hundreds 6-months old rabbits. General information about the fair value of the rabbits as well as costs to sell is as follows: Fair value per calves: Date 1.1.2019 1.7.2019 31.12.2019 31.12.2019 31.12.2019 31.12.2019 Age 2 years old 6 months old 3 years old 2 years old 1 year old 6 months old RM 505 205 805 555 405 305 Cost to sell: Auctioneer's fee Transportation cost RM4 RM1 11. Provisions are to be made for: i. Auditors' fees of RM150,000 ii. Director's remuneration of RM550,000. 12. Net realisable value of the inventory at the end of the financial year amounts to RM92,530,000. 13. The tax expense for the year was determined to be RM3,900,000. Required: Prepare the following financial statements in a form suitable for publication and in compliance with the Companies Act, 2016 and the financial reporting standards: a. Show the adjusted journal entries, incorporating the transactions in the additional information above. (41 marks) b. Statement of Profit or Loss and other Comprehensive Income for the year ended 31 December 2019. (23 marks) C. Statement of Changes in Equity for the year ended 31 December 2019. (3 marks) d. Statement of Financial Position as at 31 December 2019. (Show notes to property, plant and equipment). (33 marks) Wae Agricultural Bhd, is an agriculture company involved in plantations business as well as operating a rabbit farm for breeding and maturing rabbit for future selling purposes. Below is the trial balance of the company as at 31 December 2019. DR RM'000 CR RM'000 435,000 252,500 25,680 95,230 29,010 8,500 87,500 70,200 1,000 42,750 38,500 35,000 25,000 Revenue Cost of sales Distribution costs Closing inventories - 31 December 2019 Administrative expenses Finance costs Land valued at 1 January 2019 Building at cost Biological assets Plant and machinery at cost Motor vehicles at cost Research and Development expenditure Investment Property Acc. depreciation and amortisation as at 1 January 2019: - Building Plant and machinery - Motor vehicles - Development expenditure 5% bank loan Bank Foreign loan Tax recoverable as at 31 December 2018 Interim dividend paid Ordinary shares of RM1 each Retained earnings - 1 January 2019 Asset revaluation reserve Tax paid Trade payables Trade receivables Interest on loan 5,250 22,500 12,500 7,000 32,000 11,285 8,200 100 5,750 111,000 89,450 6,000 3,200 19,660 15,755 1.600 748,560 748.560 2. The land is revalued every two years and the balance in the asset revaluation reserve is related to the previous revaluation. Current year revaluation showed a decrease of RM9,000,000 in the value of the land and this has not been recorded. 3. Wae Agricultural Bhd acquired a building for RM24,000,000 on 1 July 2019. Legal and other expenses incurred amounted to RM1,000,000. The building has ten floors and nine of the floors are rented out at market rental of RM40,000 per month and one floor is used by Wae Agricultural Bhd. The fair value of the property as at 31 December 2019 was RM29,000,000. The company has adopted the fair value model for which land and building qualify as investment property. The only entry made was during the acquisition on 1 July 2019. 4. On 1 January 2019, an item of plant was disposed for RM3,000,000 cash. The proceeds have been treated as sales revenue by Wae Agricultural Bhd. The plant is still included in the above trial balance figures at its cost of RM10,000,000 and accumulated depreciation of RM5,000,000 (to the date of disposal). It is the policy of the company to depreciate non-current assets using the straight line method. Their expected useful lives are as follows: 5. Buildings Plant & Machinery Motor Vehicles - 50 years - 10 years - 5 years 6. Depreciation charges for all assets for the year ended 31 December 2019 have not been made. Depreciation on building and motor vehicles are to be treated as administrative expense, while depreciation on plant and machinery is treated as part of cost of sales. The research and development expenditure relate to the completed development expenditure of RM30,000,000 as at 1 January 2019 and also RM5,000,000 on new research and development project. Out of these RM5,000,000, the company has incurred RM1,000,000 for new research activity from 1 January to 30 April 2019 while development costs of RM500,000 per month were incurred from 1 May to 31 December 2019. This new project is still at a development stage and is expected to be successful. All development costs capitalized are amortized at 10% per annum using straight-line method, and charged to cost of sales. 7. 8. A debtor ( Muya Sdn Bhd) who owed Wae Agricultural Bhd RM250,000 was declared a bankrupt. For every RM10 owed only RM7 could be collected from this debtor. Therefore, the company decided to write-off the bad debts (on amount uncollectible from Muya Sdn Bhd). Wae Agricultural Bhd is being sued by a customer for RM1,500,000 for breach of contract over a cancelled order. Wae Agricultural Bhd has obtained legal opinion that there is a 10% chance that Wae Agricultural Bhd will lose the case. The unrecoverable legal costs of defending the action are estimated at RM125,000 and this has not yet been provided for as the legal action will not go to court until next year. 9. The foreign loan of RM8,200,000 is in respect of a borrowing of SD3,280,000 raised on 1 April 2019. On 1 August 2019, a payment of SD1,200,000 was made and on that date the spot rate was RM2.6:SD1. The spot rate on 31 December 2019 was RM2.40:SD1. The only entry made for the loan was on 1 April 2019. 10. The Company's biological assets consist of two thousands 2-years old rabbits which were purchased on 1 January this year. The Company was in the early stage of breeding and maturing its rabbits and would expect to sell its rabbits in 3 years time. On 1 July 2019, the company bought additional five hundreds 6-months old rabbits. General information about the fair value of the rabbits as well as costs to sell is as follows: Fair value per calves: Date 1.1.2019 1.7.2019 31.12.2019 31.12.2019 31.12.2019 31.12.2019 Age 2 years old 6 months old 3 years old 2 years old 1 year old 6 months old RM 505 205 805 555 405 305 Cost to sell: Auctioneer's fee Transportation cost RM4 RM1 11. Provisions are to be made for: i. Auditors' fees of RM150,000 ii. Director's remuneration of RM550,000. 12. Net realisable value of the inventory at the end of the financial year amounts to RM92,530,000. 13. The tax expense for the year was determined to be RM3,900,000. Required: Prepare the following financial statements in a form suitable for publication and in compliance with the Companies Act, 2016 and the financial reporting standards: a. Show the adjusted journal entries, incorporating the transactions in the additional information above. (41 marks) b. Statement of Profit or Loss and other Comprehensive Income for the year ended 31 December 2019. (23 marks) C. Statement of Changes in Equity for the year ended 31 December 2019. (3 marks) d. Statement of Financial Position as at 31 December 2019. (Show notes to property, plant and equipment). (33 marks)