QUESTION 3 (15 MARKS: 36 MINTUES)

1. Arumugam and Mokhtar were formerly operating as competing retail stores. However, they decided to form a partnership named ARMSTAR, effective from 1 January 2020 to consolidate their two businesses. The following balances were extracted from the books of ARMSTAR for the year ended 31 December 2020:

	Debit (RM)	Credit (RM)
Vehicles	45,000
Equipment	23,500
Cabinet and Furnitures	14,400
Accounts receivable	13,200
Cash	17,200
Inventory - 1 January 2020	41,700
Accounts payable		29,700
Capital: Arumugam		38,000
Mokhtar		76,000
Withdrawals: Arumugam	10,000
Mokhtar	15,000
Profit for the year		36,300
	180,000	180,000

Additional information:

1. Return on the capital investment for each partner is at 10% per annum.

2. Arumugam is entitled to a monthly salary of RM1,200.

3. Withdrawals are charged at 12% per annum.

4. Arumugam and Mokhtar agreed to share ARMSTARs profit and loss based on 1:3 ratio.

REQUIRED:

(a) Prepare the Statement of Profit and Loss Appropriation of ARMSTAR for the year ended 31 December 2020.

(6 Marks)

(b) Compute the partners equity segment in the Statement of Financial Position of ARMSTAR as of 31 December 2020.

(3 Marks)

B. (a) Explain TWO (2) differences between a private limited company and a public limited company.

(2 Marks)

(b) A company may opt to raise its fund by borrowing money from the public.

In response to the statement above, discuss TWO (2) available methods of borrowing and differences between both options.

(4 Marks)