UNIVERSITI TEKNOLOGI MARA

GROUP PROJECT

COURSE : FINANCIAL ACCOUNTING AND REPORTING 2

COURSE CODE : FAR460

SEMESTER : MARCH – AUG 2023

INSTRUCTIONS TO STUDENTS

1. This project contains two (2) parts – PART A and PART B.

2. Answer all questions.

3. This project should be done in a group of three (3) students.

4. Each group should not copy another’s group answers. If plagiarism is detected, marks will be
deducted based on the examiner’s discretion.

5. All answers may be hand-written, and each group must submit them in pdf format based on a
predetermined platform by the examiner.

6. Each group is required to submit the project, latest by Week 14. Each group is advised to keep
a copy of your submitted assignment for future reference. Where necessary, show your
workings clearly.

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QUESTION

Roses Bhd. is a Company incorporated in Malaysia. The Company manufactures and wholesaler of modern
furniture for home and office use. The Company has adopted a manufacturing technology from Japan and is
subject to strict quality controls.

Below is the trial balance of the Company for the year ended 31 December 2022:

Debit Credit
RM’000 RM’000
Sales 240,000
Cost of sales 105,300
Interim dividend paid 10,000
Administrative expenses 22,000
Selling and distribution expenses 10,000
Interest on debenture 800
Tax payable as at 1 January 2022 2,300
Freehold land at valuation as at 1 January 2022 170,000
Buildings at cost as at 1 January 2022 50,400
Plant and machinery at cost as at 1 January 2022 63,800
Immature biological assets 2,200
Accumulated depreciation as at 1 January 2022
Buildings 14,000
Plant and machinery 20,000
Investment property in-progress as at 1 January 2022 7,000
License (Intangible asset) 24,000
Accumulated amortization of intangible assets as at 1 January 2022 10,000
Fixed deposits 10,000
Ordinary share capital 89,200
Retained earnings as at 1 January 2022 10,000
Asset revaluation reserve (land) as at 1 January 2022 30,000
5 % Debentures 50,000
Trade receivables and payables 15,000 80,000
Cash and bank balances 30,000
Inventories 25,000
545,500 545,500

Additional information:

1. Credit sales on 30 December 2021 worth RM1,500,000 have been recorded as sales for the
current year (2022).

2. On 5 January 2022, the Company purchased a lorry for a cost of is RM500,000. This
transaction has not yet been recorded. It is Company policy to calculate depreciation
expenses for motor vehicles based on the straight-line method within 5 years (its useful life)
and will be charged to the statement of profit or loss on an annual basis.

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3. All plant and machinery were initially depreciated within 10 years (their useful lives) based
on a straight-line method and charged to the statement of profit or loss on a yearly basis. On
1 January 2022, the Company decided to change the remaining useful life of one of its
machines (say, machine A). Machine A was purchased on 1 January 2020 for RM4 million.
After 2 years of use (with a remaining useful life of 8 years), the Company decides to extend
the remaining useful life of machine A to 10 years.

4. The Company has amortised all intangible assets on a straight-line basis within 10 years of
their useful lives and charged per year basis in the statement of profit or loss. On 1 July 2022,
the Company resolved to dispose of one of its licences (classified as an intangible asset) to
Lily Berhad for a cash consideration of RM6 million. The licence was acquired on 1 January
2020 for RM4 million.

5. The Company constructed a three-story industrial building to lease to third parties.

Construction began on 1 January 2021 and the accumulated construction cost that has been
recorded until 31 December 2021 amounts to RM7,000,000. To finance the project, the
Company obtained a bank loan of RM40 million on 1 October 2022. The bank loan carries an
interest rate of 5% per annum. The construction was completed on 28 December 2022 and
the following are the accumulated costs (including costs in 2021) associated with the
building:

RM’000
Contractors’ cost 10,000
Direct labours and material usage 8,000
Embedded electrical and air conditioning 6,000
Interest on bank loan (3 months) 500
Window and embedded equipment 5,000
Lift and elevators system 3,000
Engineering and technical overhead 3,000

At the end of the year, the market value of the building was RM50 million. Records have yet
to be made to account for these transactions. The Company decided to capitalise on the
interest paid. Investment property is initially measured at cost, which includes transaction
costs. After initial recognition, investment properties are stated at fair value.

6. In 2018, the Company started growing its own timber to counter rising timber prices. On 1
January 2018, the Company bought 400 hectares of uncultivated land to convert it into a
timber tree plantation. The maturity period of the timber trees is ten years. The costs
associated with planting the timber trees are as follows:

2019 2020 2021 2022

Cost
RM’000 RM’000 RM’000 RM’000
Cost of clearing and levelling 900
Cost of construction roads and drain 400
Cost of seedling 30 40 25 35
Salary and Wages 160 180 200 210
Other direct costs 80 80 105 90

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 The Company has accounted for costs incurred in 2019 through 2021. However, no record
has been made for the transaction costs incurred in 2022. The Company applies MFRS141
Agriculture, to record the costs related to timber tree plantation.

7. The Company has adopted the revaluation model for its buildings classified as property,
plant and equipment. The buildings are depreciated on a straight-line basis over 20 years,
with full depreciation in the year of acquisition and none in the year of disposal.

On 15 January 2022, the Company disposed of one of its buildings (say, Building X) for
RM4,000,000. Building X was acquired in 2018 at a cost of RM3,000,000. No record of the
disposal was made.

8. On 15 December 2022, the Company declared a final ordinary dividend of RM12 million for
the financial year ended 31 December 2022. No payment was made, and no records were
kept for this transaction.

9. The 5% Debenture relates to a debt instrument issued by the Company on 1 July 2020 and
has a maturity of 15 years.

10. The current tax expense of the Company was estimated at RM23,681,000.

REQUIRED:

PART A (GROUP PROJECT 1)

a. Refer to additional information (3). Prepare relevant journal entries to record the changes in the
machine’s useful life for the year ending 31 December 2022. (Show relevant workings, narrations
for the journal is not required).

b. Refer to additional information (4). Prepare relevant journal entries to record the disposal of the
license. (Show relevant workings, narrations for the journal is not required).

c. Refer to additional information (5). Discuss the appropriate accounting treatment for the
industrial building for year ended 31 December 2022. Prepare the relevant journal entries.
(Show relevant workings, narrations for the journal is not required).

d. Refer to additional information (6). Explain the appropriate accounting treatment for costs associated
with timber plantations. Your explanation should include the classification of the plantation costs and their
measurement at the time of recognition and after initial recognition.

e. Refer to additional information (7). Prepare relevant journal entries for the disposal of the
building in 2022. (Show relevant workings, narrations for the journal is not required).

f. Refer to additional information (8). Explain the appropriate accounting treatment if the
Company declares the ordinary dividend after the reporting period.
(50 Marks)

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PART B (GROUP PROJECT 2)

Prepare the following financial statements in accordance with the requirements of the Companies Act 2016
and MFRS101 Presentation of Financial Statements and other relevant Malaysian Financial Reporting
Standards:

a. The Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December
2022.

b. The Statement of Changes in Equity for the year ended 31 December 2022.

c. The Statement of Financial Position as at 31 December 2022.

d. The Note to Property, Plant and Equipment for the year ended 31 December 2022.
(50 marks)

[END OF QUESTIONS]