QUESTION 2 (25 MARKS) i. Identify and explain each of the below situations whether it is a change in policy, or a change in estimate or an error: The chief financial controller had announced that one line product has lost its customer appeal and will be phased out over the next 2 years. Due to this situation, a decision has been made to lower the estimates lives on related production equipment from the remaining 4 years to 2 years. (CLO2:PLO2:C1)(2 marks) ii. The high building was converted from sales offices to the accounting department at the beginning of 2016. Therefore, the expenses related to this building will now appear as an administrative expense rather than selling expense. (CLO2:PLO2:C1)(2 marks) ii. Management has decided to switch from the LIFO inventory valuation method to the average cost method for all inventories. (CLO2:PLO2:C1)(2 marks) The year-end salaries payable of RM7,000 were not recorded because the bookkeeper thought that "they were immaterial.. (CLO2:PLO2:C1)(2 marks) During the course of finalizing the accounts for year 4, the accountant discovered that goods sold in year 3 of RM30,000 were included in the closing inventory of year 3. The opening inventory of year 34 included this inventory. (CLO2:PLO2:C1)(2 marks) b) Discuss the accounting treatment for each of independent events and transactions: On 1 April 2017, Mr. Annuar deposited RM10,000 in a Maybank fixed deposit account. The interest rate was 10% per annum payable on 31 March 2018. Required: How much revenue can Mr. Annuar recognise as interest income on 31 December 2017 based on a time basis? (Show calculations) (CLO1:PLO3:C2)(4 marks) ii. On 1 January 2017, Mr. Faris purchases RM400.000, 2% government bonds that will be repaid at a premium of 25% on redemption. The current market interest rate is 8%. Required: How much interest income should Mr. Faris recognise in 2017 and in 2018 based on a time basis? (Show calculations) (CLO1:PLO3:C2)(6 marks) Mariah Carmen, a singer, has a cut a new compact disc with a recording company. Royalty payable to her is RM10 for every compact disc sold. A total of 500,000 units has been produced but only 200,000 units have been sold. Required: iv. Calculate the royalty income that Mariah Carmen will receive based on accrual basis (Show calculations) (CLO1:PLO3:C2)(2 marks) Maimunah holds 100,000 ordinary shares in Raina Bhd. at the annual general meeting held on 5 May 2018. Dividend proposed for the year of 2016 is 10%. Required: When can Maimunah recognise her dividend income based on the shareholder's right to receive payment? (CLO1:PLO3:C2)
