Question 2 Two companies Samsong Sdn Bhd and Huaway Sdn Bhd trade in the same market. Their financial statements for the year ended 30 September 2019 are summarised below: Statements of Comprehensive Income for the year ended 30 September 2019: Samsong Huaway RM'000 RM'000 Revenue 284 405 Cost of sales (155) (251) Gross profit 129 154 Administrative (24) (37) Distribution (35) (53) Depreciation (9) (12) Interest on loan (5) Profit before tax 61 47 Income tax expense Profit for the year 51 43 Note: dividends paid during the year Nil (10) 8 4 Statement of Financial Position as at 30 September 2019 Samsong Huaway RM 000 RM'000 RM 000 RM 000 Assets Non-current assets At cost Less : Acc depreciation 515 320 (75) (96) 245 419 91 293 46 75 64 15 Current assets Inventory Trade receivables Bank Total assets Equity and liabilities Equity shares of RM1 each Retained earnings 446 802 150 250 108 177 258 427 Nil 50 Non-current liabilities 10% loan notes Current liabilities Trade payables Government grants Total equity and liabilities 140 300 48 25 446 802 5 Required: Calculate the following ratios for Samsong and Huaway: (State the formulae used for calculating the ratios.) a i. ii. Gross profit percentage Net profit percentage Asset turnover ratio iii. iv. Current ratio V. Quick ratio (acid test ratio) vi. Receivables collection period (18 marks) b. Compare and comment on the performance of the companies as indicated by the ratios you have calculated in part a. (7 marks) Question 3 Precico Enterprise purchased two rivet-making machines on 1 January 2017 at a cost of RM15,000 each. Each had an estimated life of five years and a nil residual value. The straight line method of depreciation is used. Owing to an unforeseen slump in market demand for rivet, the business decided to reduce its output of rivets, and switch to making other products instead. On 31 March 2019, one rivet-making machine was sold (on credit) to a buyer for RM8,000. Later in the year, however, it was decided to abandon production of rivets altogether, and the second machine was sold on 1 December 2019 for RM2,500 cash. Required: Prepare the machinery account, provision for depreciation of machinery account and disposal of machinery account for the accounting year to 31 December 2019 (20 marks) Explain the circumstances that the reducing balance method is more appropriate than the straight-line method. Give reasons for your answer. (5 marks) a. b. 6