question 1

QUESTION 1 (25 MARKS: 45 MINUTES) 30 15 A. Financial reports, such as the Statement of Financial Position, contain information that can influence decision making of a wide range of users including potential investors, creditors, and government agencies. Accordingly, financial reports should comply with rules and regulations set up by the bodies that regulate the financial reporting process of a country. Required: Identify and explain any TWO (2) statutory regulations on financial accounting and reporting in Malaysia. (6 marks) Additional Information: 2015 1. All sales and purchases are on credit. 2. Other expenses consist of depreciation of property, plant and equipment amounted to RM1,000,000 and amortization of intangible assets amounted to RM280,000. Included in other expenses is also insurance expense amounted to RM2,000,000. Other than that, all other expenses were paid in cash. 3. During the year, there were no disposals of non-current assets. Required: Prepare a statement of Cash Flows in accordance with MFRS 107 for the year ended 31 December 2015 using the indirect method of presenting cash flows. (15 marks) B. For financial information to be useful, the Conceptual Framework identifies two fundamental qualitative characteristics and four enhanced qualitative charateristics. They are relevance, faithful representation, comparability, verifiability, timeliness, and understandability. QUESTION 2 (25 MARKS: 45 MINUTES) You are given the following scenarios : A. I-Boat Bhd. has secured a tender to establish boat business in Bandaraya Kuala Terengganu. The boats' operation begins 1 July 2015, after the license to operate is granted by the licensing authority. In the first year of operation, i-Boat Bhd. has incurred the following expenditures in establishing the boat business: 1. ABC Bhd. has recognized a machine costing RM200,000 as its non-current asset. However, there are no source documents, such as invoice, to properly support the recognition of the machine. 2. In preparing its Statement of Cash Flow for the year 2014, DEF Bhd. has used the indirect method to present its net cash from operating activities. For the year 2015, operating activities in the Statement of Cash Flow of DEF Bhd. is to be presented using the direct method. 3. GHI Bhd. has been awarded a grant of RM600,000 from the Ministry of Health, Malaysia to assist its research program into finding a cure for diabetes. The company recognized the grant as an addition to its capital, rather than as a deferred income. 4. During the year 2014, JKL Bhd. has recognized a broadcasting license of RM1,000,000 and accordingly, the amortization expense related to the license of RM100,000. During the year 2015, the amortization expense for the same license is presented as RM200,000 eventhough there is no acquisition or disposal made in relation to the license. However, no disclosure were made with regards to the amortization methods for intangible assets. DATE COSTS RM 1 January 2015 General start-up costs. 150,000 31 March 2015 Hospitality and Service training costs for the boat drivers. 10,000 30 June 2015 Legal costs directly attributable to the acquisition of the boat 7,000 licenses. 30 June 2015 Payment to the licensing authority for the boat licenses. 100,000 1 July 2015 Purchase 10 sets of uniform for the boat drivers. 1,500 1 July 2015 Payment for a billboard advertisement for 12 months period. 20,000 At 31 December 2015, 1-Boat Bhd. made the following assessments: 1. The economic life of the boat licenses is five years beginning 1 July 2015. 2. The residual value of the boat licenses is zero. Required: For each of the above scenarios, identify the qualitative characterictics that are violated. (4 marks) Required: a) Prepare journal entries to record the above costs incurred by I-Boat Bhd. for the year ended 31 December 2015 (Assume that all the payments are made by cash). (6 marks) b) Illustrate the intangible assets information in the Statement of Financial Position of I-Boat Bhd. as at 31 December 2015. (4 marks) c) An entity generally applies MFRS138 in accounting for Intangible Assets. Elaborate the definition of an intangible asset according to MFRS138. (2.5 marks) QUESTION 1 (25 MARKS: 45 MINUTES) 30 15 A. Financial reports, such as the Statement of Financial Position, contain information that can influence decision making of a wide range of users including potential investors, creditors, and government agencies. Accordingly, financial reports should comply with rules and regulations set up by the bodies that regulate the financial reporting process of a country. Required: Identify and explain any TWO (2) statutory regulations on financial accounting and reporting in Malaysia. (6 marks) Additional Information: 2015 1. All sales and purchases are on credit. 2. Other expenses consist of depreciation of property, plant and equipment amounted to RM1,000,000 and amortization of intangible assets amounted to RM280,000. Included in other expenses is also insurance expense amounted to RM2,000,000. Other than that, all other expenses were paid in cash. 3. During the year, there were no disposals of non-current assets. Required: Prepare a statement of Cash Flows in accordance with MFRS 107 for the year ended 31 December 2015 using the indirect method of presenting cash flows. (15 marks) B. For financial information to be useful, the Conceptual Framework identifies two fundamental qualitative characteristics and four enhanced qualitative charateristics. They are relevance, faithful representation, comparability, verifiability, timeliness, and understandability. QUESTION 2 (25 MARKS: 45 MINUTES) You are given the following scenarios : A. I-Boat Bhd. has secured a tender to establish boat business in Bandaraya Kuala Terengganu. The boats' operation begins 1 July 2015, after the license to operate is granted by the licensing authority. In the first year of operation, i-Boat Bhd. has incurred the following expenditures in establishing the boat business: 1. ABC Bhd. has recognized a machine costing RM200,000 as its non-current asset. However, there are no source documents, such as invoice, to properly support the recognition of the machine. 2. In preparing its Statement of Cash Flow for the year 2014, DEF Bhd. has used the indirect method to present its net cash from operating activities. For the year 2015, operating activities in the Statement of Cash Flow of DEF Bhd. is to be presented using the direct method. 3. GHI Bhd. has been awarded a grant of RM600,000 from the Ministry of Health, Malaysia to assist its research program into finding a cure for diabetes. The company recognized the grant as an addition to its capital, rather than as a deferred income. 4. During the year 2014, JKL Bhd. has recognized a broadcasting license of RM1,000,000 and accordingly, the amortization expense related to the license of RM100,000. During the year 2015, the amortization expense for the same license is presented as RM200,000 eventhough there is no acquisition or disposal made in relation to the license. However, no disclosure were made with regards to the amortization methods for intangible assets. DATE COSTS RM 1 January 2015 General start-up costs. 150,000 31 March 2015 Hospitality and Service training costs for the boat drivers. 10,000 30 June 2015 Legal costs directly attributable to the acquisition of the boat 7,000 licenses. 30 June 2015 Payment to the licensing authority for the boat licenses. 100,000 1 July 2015 Purchase 10 sets of uniform for the boat drivers. 1,500 1 July 2015 Payment for a billboard advertisement for 12 months period. 20,000 At 31 December 2015, 1-Boat Bhd. made the following assessments: 1. The economic life of the boat licenses is five years beginning 1 July 2015. 2. The residual value of the boat licenses is zero. Required: For each of the above scenarios, identify the qualitative characterictics that are violated. (4 marks) Required: a) Prepare journal entries to record the above costs incurred by I-Boat Bhd. for the year ended 31 December 2015 (Assume that all the payments are made by cash). (6 marks) b) Illustrate the intangible assets information in the Statement of Financial Position of I-Boat Bhd. as at 31 December 2015. (4 marks) c) An entity generally applies MFRS138 in accounting for Intangible Assets. Elaborate the definition of an intangible asset according to MFRS138. (2.5 marks)