Question 1 (30 marks) The following balances have been extracted from the books of Morganite Berhad as at 31 December 2020. Bad debts Debit Credit RM RM Share capital-ordinary 400,000 Purchases and sales 300,000 600,000 Retained earnings, 1 Jan 194,000 8% Long term Loan 200,000 Land and Buildings 300,000 Motor vehicles 220,000 Machinery 170,000 Copy rights 100,000 bad 1,700 Cash 95,000 Interest expense 6,000 Accumulated depreciation-Motor vehicles 79,200 Accumulated depreciation Machinery 51,000 Return outwards 1,200 Discount received 3,500 Carriage inwards 4,700 Inventory, 1 Jan 89,000 Account receivables and Payables 66,000 56,400 Allowance for doubtful accounts 700 Insurance Insurance expense 54,000 Salary expense 90,400 Utility expense 5,100 Supplies 32,100 Dividends 52,000 1,586,000 1,586,000 Additional information: 1. Closing inventory at 31 December 2020 was valued at RM93,000. 2. The balance of the interest on loan has not been paid for the year. 3. Salaries paid in advance to three employees for RM2,500 each has been recognised as an expense on 31 December 2020. 4. A utility bill for RM400 has not been recorded and will not be paid until next month. 5. The company purchase fire insurance for the building amounting to RM54,000 on 1 April 2019. The insurance is valid for one year. 6. Allowance for doubtful accounts amounting to 2 % of account receivable has to be provided. Page 1 of 5 CONFIDENTIAL 202104/SEM103/A 7. Depreciation is to be charged as follows: Motor Vehicles 20% on reducing balance method. Machinery 10% on straight line method. Required: a) Prepare the statement of profit or loss for the year ended 31 December 2020. [13 marks) b) Prepare the retained earnings statement for the year ended 31 December 2020. [4 marks] c) Prepare the statement of financial position as at 31 December 2020. [13 marks)