FINAL SEMESTER EXAMINATION (MAY 2010 SESSION)

ADVANCED ACCOUNTING II DAC3043

LECTURER : MATRIC NO VENUE : . : . PROGRAMME : ..

October 2010 INSTRUCTIONS: 1. Candidates must read all questions carefully.

Duration : 3 hours

2. The examination script consists of FOUR (4) questions. 3. Answer ALL questions in the answer booklet provided.

THIS EXAMINATION SCRIPT CONTAINS 6 PAGES INCLUDING THE FRONT COVER

DO NOT OPEN THE EXAMINATION SCRIPT UNTIL FURTHER INSTRUCTION

CONFIDENTIAL (100 marks) Time : 3 hours

DAC3043

INSTRUCTION Answer ALL questions. Use the answer booklet provided.

1.

Given below is the Statement of Financial Position as at 31 December 2009 of Farah Sdn Bhd (FSB): RM 590,000 60,000 200,000 90,000 940,000 Equity: Share capital authorised, issued and fully paid-up capital: Ordinary shares of RM1.00 each 10% Cumulative preference shares of RM1.00 each Accumulated losses 14% Secured debentures Current liabilities: Trade payable Bank overdraft

Non current assets Goodwill Inventories Trade receivables

600,000 200,000 800,000 (200,000) 200,000 100,000 40,000 940,000

Farah Sdn Bhd had suffered losses for many years due to economic and industry downturn. At the meeting of shareholders, the following scheme of reconstruction was agreed upon: i. A new company named Hazlina Sdn Bhd (HSB) was formed with an authorised capital of 200,000 8% Preference shares of RM1.00 each and 1,400,000 ordinary shares of RM1.00 each to acquire the assets and the bank overdraft of FSB as at 31 December 2009. To issue two ordinary shares of RM1.00 each in HSB for every five ordinary shares in FSB for the benefit of the ordinary sharesholders of FSB. HSB to issue one 8% Preference shares in HSB for every one 10% Cumulative preference share in FSB for the benefit of preference shareholders of FSB. HSB to issue sufficient 10% Debentures in HSB to discharge the 14% Secured debentures in FSB at a premium of 10%. The accounts payable of FSB will be settled by RM60,000 in cash and RM40,000 of ordinary shares in HSB.

ii. iii.

iv. v.

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vi.

The assets are valued at: Non current assets Inventories Trade receivables RM 560,000 160,000 80,000

vii.

HSB to issue for cash 200,000 ordinary shares of RM1.00 each at a premium of RM0.10 each to the directors of HSB. Cost of incorporation of HSB amounted to RM4,000.

viii.

Required: (a) Prepare the Capital Reduction and Reorganisation account to close the books of Farah Sdn Bhd. (5 marks) Show the journal entries to open the books of Hazlina Sdn Bhd. (9 marks) (c) Prepare the Statement of Financial Position of Hazlina Sdn Bhd after the acquisition of Farah Sdn Bhd. (6 marks)

(b)

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2.

Herma Bhd issued 2,400,000 ordinary shares of RM1.00 each in exchange for all the issued share capital of Saiful Bhd on 1 July 2009. The market price of Herma Bhds ordinary share was RM1.50 per share. The Statement of Financial Position and the Statement of Comprehensive Income of Herma Bhd and Saiful Bhd are as follows: Statement of Financial Position as at 31 December 2009 Herma Bhd RM000 Ordinary Share of RM1.00 each 6,000 Share Premium 1,000 Retained earnings 1,000 8,000 Investment in Saiful Bhd: 2 million ordinary shares Net assets Total 4,000 4,000 8,000

Saiful Bhd RM000 2,000 1,600 3,600 3,600 3,600

Statement of Comprehensive Income for the year ended 31 December 2009 Herma Saiful Bhd Bhd RM000 RM000 Revenue 8,000 4,000 Operating Expenses (4,400) (2,400) Profit before tax 3,600 1,600 Taxation (1,000) (600) Profit after tax 2,600 1,000 Dividends paid (1,600) Retained earnings 1,000 1,000 Retained earnings b/f 600 Retained eanings c/f 1,000 1,600 i. When Herma Bhd bought the shares of Saiful Bhd, the net tangible assets was valued at RM200,000 more than its book value. This fair value was not incorporated in the books of Saiful Bhd. Goodwill is amortised over 5 years, giving a full years charge in the year of acquisition.

ii.

Required: (a) Prepare the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity for the year ended 31 December 2009. (22 marks) Prepare the Consolidated Statement of Financial Position as at 31 December 2009. (8 marks)

(b)

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3.

Statement of Financial Position of Amira, Badrul and Faizal as at 31 December 2009 are as follows: Amira Badrul Faizal RM000 RM000 RM000 Investment in Badrul: 300,000 ordinary shares of RM1.00 each 500 Investment in Faizal: 100,000 ordinary shares of RM1.00 each Dividends from Badrul Sundry assets 200 30 620 1,350

750 750

620 620

Ordinary shares of RM1.00 each 500 Retained earnings Dividends payable Total 1,000 300 50 1,350 200 50 750 400 220 620

On the 1.1.2007, Amira purchased the shares in Faizal when Faizals retained earnings had a credit balance of RM60,000. Amira acquired the shares in Badrul on 1.1.2008 when the retained earnings of Badrul was RM100,000 (credit).The book values of the net assets of Badrul and Faizal reflected their fair values when Amira purchased their shares. All goodwill is amortised over 10 years. Required: Prepare the relevant ledger accounts for the consolidation and the Consolidated Statement of Financial Position as at 31 December 2009. (25 marks)

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4.

Non Going Concern (NGC) company, filed a debtors bankruptcy petition on 10 May 2009 and its Statement of Affairs included the following amounts: Carrying amounts (RM) Assets pledged for fully secured liabilities Assets pledged for partially secured liabilities Free assets Total Unsecured liabilities with priority Fully secured liabilities Partially secured liabilities Unsecured liabilities without priority Total 300,000 160,000 200,000 660,000 20,000 240,000 200,000 320,000 780,000 Current Fair values (RM) 360,000 100,000 260,000 720,000

The NGC company was liquidated by the bankruptcy trustee. The assets were realized at their current fair values. The trustee is entitled to a commission of 5% on assets realized and a 2% commission on the amount paid to unsecured creditors. Required: (a) Prepare the liquidators final statement. (15 marks) (b) (c) Distinguish between secured and unsecured creditors. (5 marks) State FIVE (5) duties of the committee appointed by the court under the Reform Act. (5 marks)

END OF QUESTION PAPER

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