Q1. The following is the trial balance related to Sofia Berhad at 30 September 2019: Debit Credit RM'000 RM000 Revenue 516,514 Cost of sales 310,000 Building at cost 1 October 2018 90,650 Freehold land at valuation as at 1 October 2018 225.000 Plant and equipment at cost 1 October 2018 58,500 Accumulated depreciation at 1 October 2018: Buildings 9,065 Plant and equipment 34,500 Selling and distribution expenses 15,980 Administrative expenses 12,300 Debenture interest paid 800 Bank 5,796 Tax recoverable 500 Inventory 122,000 Contributed capital 27,788 Dividend paid 1.000 Revaluation reserve 16,000 Retained earnings at 1 October 2018 125,761 10% Debenture RM1 each 10,000 10% Redeemable preference shares RM1 each 100,000 Deferred tax 3,200 Accounts receivables/payables 914 612 Total 843,440 843,440 Additional information: The company decided to adopt the revaluation model for building. The fair value of building on 1 October 2018 is RM90,000,000. The remaining useful life of the building as at that date is 25 years. The fair value of the land as at 30 September 2019 is RM250,000,000. Both revaluations have yet to be recorded in the accounts as at year end. In addition, the company does not wish to make annual transfers to retained earnings for any revaluation surplus made as the asset is being used and depreciated. A new equipment value of RM1,650,000 was purchased using cheque on 1 October 2018 to replace an old equipment that was purchased on 1 October 2014 at a cost of RM1,220,000. The old equipment was then disposed for RM885,000 on 1 October 2018. No transactions was found on the new acquisition and the disposal of the old equipment in the accounts at year end. Question 1. (Continued) Plant and equipment is depreciated at 8% per annum using the reducing balance method. No depreciation or amortisation has yet been charged on any non-current asset for the year ended 30 September 2019. It has been discovered that the former accountant engaged in fraudulent financial reporting. Currently, RM25,000 of trade receivables has been deemed to not exist and requires to be written off immediately. Sofia commenced a research and development project on 1 January 2019. It spent RM1.2 million per month on research until 31 March 2019, at which date the project passed into the development stage. From 1 April 2019, it spent RM1 million per month until the year end (30 September 2019), at which date development was completed. On 1 September 2019, the directors of Sofia were confident that the new product would be a commercial success and meets all criteria for recognition as intangible assets. All payment was made via Sofia's bank account. Sofia spent RM10,000 on an advertisement campaign in January 2019 and this transaction had been already captured as selling and distribution expense. Sofia expected the advertisement cost will boost substantial sales. The tax expense for the year was RM5,500,000. This amount did not include an increase in the deferred tax liability. The deferred tax liability was determined to be RM3,400,000 as at 30 September 2019. On 30 September 2019, the company decided to redeem all the debentures at a premium of 5%. On 1 October 2018, the company redeemed all the redeemable preference shares by the way of new issue for total proceeds of RM25 million and the balance through profits available for dividends. The new issue of ordinary shares was fully subscribed. None of these have been captured in the accounts. (For the purposes of this question, you are to assume that financial statements for the year ended 30 September 2019 are yet to be finalised and approved by the directors.) Required: (a) Prepare the following financial statements for Sofia Berhad: (1) Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 September 2019. Classify expenses by function. (10 marks) Statement of Changes in Equity for the year ended 30 September 2019. (10 marks) 11) Question 1 (a) (Continued) Statement of Financial Position as at 30 September 2019. (15 marks) (Show all your workings. Keep your answers at two decimal points. Present your answer using RM 000 in the column heading) (6) Assuming in July 2020, a major fire broke out in Sofia Berhad's operation Sofia has no insurance, and now the management of the company believes it is unable to continue trading. Explain how this should be reflected in their financial statements for the year ended 30 September 2020. (5 marks) Q1. The following is the trial balance related to Sofia Berhad at 30 September 2019: Debit Credit RM'000 RM000 Revenue 516,514 Cost of sales 310,000 Building at cost 1 October 2018 90,650 Freehold land at valuation as at 1 October 2018 225.000 Plant and equipment at cost 1 October 2018 58,500 Accumulated depreciation at 1 October 2018: Buildings 9,065 Plant and equipment 34,500 Selling and distribution expenses 15,980 Administrative expenses 12,300 Debenture interest paid 800 Bank 5,796 Tax recoverable 500 Inventory 122,000 Contributed capital 27,788 Dividend paid 1.000 Revaluation reserve 16,000 Retained earnings at 1 October 2018 125,761 10% Debenture RM1 each 10,000 10% Redeemable preference shares RM1 each 100,000 Deferred tax 3,200 Accounts receivables/payables 914 612 Total 843,440 843,440 Additional information: The company decided to adopt the revaluation model for building. The fair value of building on 1 October 2018 is RM90,000,000. The remaining useful life of the building as at that date is 25 years. The fair value of the land as at 30 September 2019 is RM250,000,000. Both revaluations have yet to be recorded in the accounts as at year end. In addition, the company does not wish to make annual transfers to retained earnings for any revaluation surplus made as the asset is being used and depreciated. A new equipment value of RM1,650,000 was purchased using cheque on 1 October 2018 to replace an old equipment that was purchased on 1 October 2014 at a cost of RM1,220,000. The old equipment was then disposed for RM885,000 on 1 October 2018. No transactions was found on the new acquisition and the disposal of the old equipment in the accounts at year end. Question 1. (Continued) Plant and equipment is depreciated at 8% per annum using the reducing balance method. No depreciation or amortisation has yet been charged on any non-current asset for the year ended 30 September 2019. It has been discovered that the former accountant engaged in fraudulent financial reporting. Currently, RM25,000 of trade receivables has been deemed to not exist and requires to be written off immediately. Sofia commenced a research and development project on 1 January 2019. It spent RM1.2 million per month on research until 31 March 2019, at which date the project passed into the development stage. From 1 April 2019, it spent RM1 million per month until the year end (30 September 2019), at which date development was completed. On 1 September 2019, the directors of Sofia were confident that the new product would be a commercial success and meets all criteria for recognition as intangible assets. All payment was made via Sofia's bank account. Sofia spent RM10,000 on an advertisement campaign in January 2019 and this transaction had been already captured as selling and distribution expense. Sofia expected the advertisement cost will boost substantial sales. The tax expense for the year was RM5,500,000. This amount did not include an increase in the deferred tax liability. The deferred tax liability was determined to be RM3,400,000 as at 30 September 2019. On 30 September 2019, the company decided to redeem all the debentures at a premium of 5%. On 1 October 2018, the company redeemed all the redeemable preference shares by the way of new issue for total proceeds of RM25 million and the balance through profits available for dividends. The new issue of ordinary shares was fully subscribed. None of these have been captured in the accounts. (For the purposes of this question, you are to assume that financial statements for the year ended 30 September 2019 are yet to be finalised and approved by the directors.) Required: (a) Prepare the following financial statements for Sofia Berhad: (1) Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 September 2019. Classify expenses by function. (10 marks) Statement of Changes in Equity for the year ended 30 September 2019. (10 marks) 11) Question 1 (a) (Continued) Statement of Financial Position as at 30 September 2019. (15 marks) (Show all your workings. Keep your answers at two decimal points. Present your answer using RM 000 in the column heading) (6) Assuming in July 2020, a major fire broke out in Sofia Berhad's operation Sofia has no insurance, and now the management of the company believes it is unable to continue trading. Explain how this should be reflected in their financial statements for the year ended 30 September 2020