SECTION B - ANSWER ALL QUESTIONS Question 1 Mutiara Sdn. Berhad is a trading company and the company operates in a rented shop space in Damansara. The following information is the company's unadjusted year-end trial balance dated December 31, 2017. Mutiara Sdn. Berhad Unadjusted Trial Balance as at 31 December, 2017 RM RM Accounts receivable 690,000 Allowance for doubtful debt 10,500 Accounts payable 242,000 Administrative expense 175,000 Cash and cash equivalent 79,079 Cost of goods sold 620,000 Income tax expense 26,000 5.5% 5-year investment 60,000 Merchandise inventory (December 31, 2017) 150,000 Freehold land 100,000 Machinery and equipment 161,360 Accumulated depreciation: machinery and equipment 19,760 Ordinary dividend 66,000 Ordinary share capital 200.000 Patent, net 20,000 8% Bonds payable - 5 years 100,000 Discount on bonds payable 3.221 Retained earnings (January 1, 2017) 110,540 Rent revenue 18,000 Revaluation reserve (January 1, 2017) 154,000 Sales revenue 1,480,000 Sales returns and allowances 40,000 Selling expense 140,000 Supplies 4,140 2,334,800 2,334,800 At the end of the accounting period, the following transactions were unrecorded and need to be adjusted in the ledger accounts. 1. Selling expense accrued at year end amounted to RM22,000. 2. Supplies purchased during the year amounted to RM4,140. This amount was recorded in the supplies account. Supplies unused at year end amounted to RM1,840. Supplies used is part of administrative expense. 3. New shares were issued to shareholders and all shares were paid in full, RM200,000. 4. The land has a fair value of RM80,000 more than its carrying value. 5. At year-end accounts receivable written-off amounted to RM2,300. Allowance for doubtful debt is estimated at 2% of ending account receivable balance. Bad debt expense is treated as a selling expense. 6. Full year interest on the 5.5% long-term investment is unrecorded at year end. 7. The machinery and equipment is depreciated at the rate of 15% per year using the diminishing balance method. The company charges depreciation of machinery and equipment as cost of goods sold. Required: (a) Journalise transactions (1) - (7) above. (6 marks) (b) Prepare: i) A Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2017. ii) A Statement of Changes in Equity for the year ended 31 December 2017. iii) A Statement of Financial Position as at 31 December 2017 for Mutiara Sdn Berhad. (18 marks) (c) Financial statements, other than the statement of cash flows, are prepared using the accrual basis of accounting. How are revenue and expense items recognised and recorded in the financial statements? (2 marks)