QUESTION 1

Hasanah Bhd is a medium-sized company, located in Bayan Lepas. The company closes its account on 31 December every year. The following information relates to investments of Hasanah Bhd that occurred in 2017 and 2018.

Date

Transaction

7/7/2017

Acquired 70,000 unit shares of Yayasan Bhd at RM12.50 per unit with transaction cost of RM9,000. The shares were purchased for long term investment.

22/10/2017

Acquired 30,000 unit of shares of Ronson Bhd at RM6.00 per unit. The transaction cost incurred was RM5,000. Due to the foreseeable increment in the Ronson Bhd shares price, Hasanah Bhd intends to sell the shares after 10 months from the date of acquisition.

30/12/2017

Received a cash dividend of RM0.30 per share on its investment in Yayasan Bhd.

31/12/2017

The market value per share of Yayasan Bhd and Ronson Bhd were RM13.00 and RM7.50 respectively.

3/1/2018

Acquired RM3,000,000 of 11% bonds for RM2,850,000. The bonds will mature in 10 years and provide an effective interest rate of 12%. The interest is paid at the end of the year. The bonds have been classified as held for collection and selling (HFCS).

6/4/2018

Sold 55% of the investment in Ronson Bhd at RM130,000.

31/12/2018

Received annual interest of bonds purchased on 3 January 2018.

REQUIRED:

(Round all numbers to the nearest RM)

(a)Prepare related journal entries to record the above transactions.

(b) extract of the Statement of Profit or Loss and Other Comprehensive Income for the year ended 2017.

(c)Explain the general accounting and reporting rule for the following equity investments:

i.held-for-trading

ii.held for non-trading

QUESTION 2

Marco Bhd purchased the following equity investments which are traded at Bursa Malaysia on 1 October2017:

(i)10,000 shares of Komar Bhd at RM1.50 per share. Transaction cost incurred was RM2,500.Marco Bhd intends to sell shares of Komar Bhd in early 2018 to take advantage of the changes in the share prices.

(ii) 80,000 shares of Ram Bhd at RM1.80 per share. Transaction cost incurred was RM5,000. Marco Bhd intends to establish these shares as a non-tradinginvestment.

In each investment above, Marco Bhd acquired less than 20 percent of interest in the company.Marco Bhd received a cash dividend of RM0.05 per unit of its investment in shares of Ram Bhd on 20 December 2017. On 31 December 2017 (financial year end), the fair value per share of Komar Bhd and Ram Bhd were RM1.60 and RM2.00 respectively. Marco Bhd sold all shares of Komar Bhd at the selling price of RM1.90 per share on 5 March 2018.

REQUIRED:

Prepare journal entries for Marco Bhd related to equity investments above.

QUESTION 3

On 1 January 2018, Open Bhd purchased 12% (stated rate) bonds, having a maturity value of RM500,000 for RM537,907.40. The bonds provide the bondholders with a 10% yield (market rate). They are dated 1 January 2018 and mature 1 January 2023 with interest receivable 31 December of each year. Open Bhd business model is to hold these bonds to collect contractual cash flows.

REQUIRED:

(a)Prepare the journal entry at the date of the bond purchase.

(b)Prepare bond amortization schedule.

(c)Prepare the journal entry to record the interest received and the amortization for 2018.

(d) Prepare the journal entry on 1 January 2023.