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ACC3201 (F) / Page 1 of 7



This paper consists of TWO (2) sections. Answer ALL the questions in SECTION A and
any TWO (2) questions in SECTION B in the answer booklet provided.

SECTION A: Answer ALL questions

Section A

Question 1

The following trial balance relates to Cavern as at 30 September 2010.

RM’000 RM’000
Equity shares of RM0.20 each – note i 50,000
8% loan note – note ii 30,600
Retained earnings – 30 September 2009 12,100
Other equity reserves 3,000
Revaluation reserve 7,000
Share premium 11,000
Land and building at valuation – 30 September 2009:
- Land (RM7 million) and building (RM36 million) – note iii 43,000
Plant and equipment at cost – note iii 67,400
Accumulated depreciation plant and equipment – 30 September 13,400
Available for sale investment - note iv 15,800
Inventory at 30 September 2010 19,800
Trade receivables 29,000
Bank 4,600
Deferred tax 4,000
Trade payables 21,700
Revenue 182,500
Cost of sales 128,500
Administrative expenses – note i 25,000
Distribution cost 8,500
Loan note interest paid 2,400
Bank interest 300
Investment income 700
Current tax – note v ____900 _______
340,600 340,600
ACC3201 (F) / Page 2 of 7

The following notes are relevant:

(i) Cavern has accounted for a fully subscribed rights issue of equity shares made on
1 April 2010 of one new share for every four in issue at 42 cents each. The
company paid ordinary dividends of 3 cents per share on 30 November 2009 and 5
cents per share on 31 May 2010. The dividend payments are included in
administrative expenses in the trial balance.
(ii) The 8% loan note was issued on 1 October 2008 at its nominal value of RM30
million. The loan note will be redeemed on 30 September 2012 at a premium
which gives the loan note an effective finance cost of 10% per annum.
(iii) Non-current assets:
Cavern revalues its land and building at the end of each accounting year. At 30
September 2010 the relevant value to be incorporated into the financial statement
is RM41.8 million. The building’s remaining life at the beginning of the current
year (1 October 2009) was 18 years. Cavern does not make an annual transfer
from the revaluation reserve to retained earnings in respect of the realisation of the
revaluation surplus. Ignore deferred tax on the revaluation surplus.
Plant and equipment includes an item of plant bought for RM10 million on 1
October 2009 that will have a 10 year life (using straight line depreciation with no
residual value). Production using this plant involves toxic chemicals which will
cause decontamination costs to be incurred at the end of its life. The present value
of these costs using a discount rate of 10% at 1 October 2009 was RM4 million.
Cavern has not provided any amount for this future decontamination cost. All
other plant and equipment is depreciated at 12.5% per annum using the reducing
balance method.
No depreciation has yet been charged on any non-current asset for the year ended
30 September 2010. All depreciation is charged to cost of sales
(iv) The available for sale investment held at 30 September 2010 had a fair value of
RM13.5 million. There were no acquisition or disposal of these investments
during the year ended 30 September 2010.
(v) The income tax expense for the year is RM6.250 million, out of which RM5.6
million is payable within one year and a deferred tax account has been created
with credit balance of RM3.750 million.

(a) Prepare the statement of comprehensive income for Cavern for the year ended 30
September 2010.
(11 marks)

(b) Prepare the statement of changes in equity for Cavern for the year ended 30
September 2010.
(5 marks)

(c) Prepare the statement of financial position for Cavern for the year ended 30
September 2010.
(9 marks)
(Total 25 marks)
ACC3201 (F) / Page 3 of 7

Question 2

Part A
The objective of MFRS 136 Impairment of assets is to prescribe the procedure that an entity
applies to ensure that its assets are not impaired.

Explain what is meant by an impairment review. Your answer should include reference to
assets that may form a cash generating unit.
Note: You are NOT required to describe the indicators of an impairment or how impairment
losses are allocated against assets.
(5 marks)

Part B (i)

Telepath acquired an item of plant at a cost of RM800,000 on 1 April 2010 that is used to
produce and package pharmaceutical pills. The plant had an estimated residual value of
RM50,000 and an estimated life of five years, neither of which has changed. Telepath uses
straight line depreciation. On 31 March 2012, Telepath was informed by a major customer
that it would no longer be placing orders with Telepath. Even before this information was
known, Telepath had been having difficulty finding work for this plant. It now estimates that
net cash inflows earned from the plant for the next three years will be:

Year ended 31 March 2013 220
31 March 2014 180
31 March 2015 170

On 31 March 2015, the plant is still expected to be sold for its estimated realisable value.
Telepath has confirmed that there is no market in which to sell the plant at 31 March 2012.
Telepath’s cost of capital is 10% and the following values should be used:

Value at RM1 at: RM

End of year 1 0.91
End of year 2 0.83
End of year 3 0.75

(7 marks)

Part B (ii)
Telepath owned a 100% subsidiary, Tilda, which is treated as a cash generating unit. On 31
March 2012, there was an industrial accident (a gas explosion) that caused damage to some of
Tilda’s plant. The assets of Tilda immediately before the accident were:

Goodwill 1,800
Patent 1,200
Factory building 4,000
ACC3201 (F) / Page 4 of 7

Plant 3,500
Receivables and cash _1,500

As a result of the accident, the recoverable amount of Tilda is RM6.7 million.

The explosion destroyed (to the point of no further use) an item of plant that had a carrying
amount of RM500,000.
Tilda has an open offer from a competitor of RM 1 million for its plant. The receivables and
cash are already stated at their fair values less cost to sell (net realisable values).
(13 marks)
(Total 25 marks)


Calculate the carrying amount of the assets of the assets in (i) and (ii) above at 31 March
2012 after applying any impairment losses. Explain your treatment.

Section B: Answer any TWO questions

Question 3

Part A

(a) Define the term “property, plant and equipment”.

(2 marks)

(b) When should an item of property, plant and equipment be recognized as an asset and
when should it be derecognized?
(4 marks)

(c) Which of the following cost should be included in the cost of an item of property,
plant and equipment at initial recognition?
- The purchase price of the item
- Import duties incurred in relation to the item
- Delivery charges
- Minor spare parts for the item
- The cost of a maintenance contract
- Non-refundable purchase taxes relating to the item
(4 marks)
ACC3201 (F) / Page 5 of 7

Part B

(a) Grease Bhd leased out tangible non-current assets as operating leases. At 1 January
x5, the carrying value of such assets was RM20 million. These assets were recently
leased out on operating leases and have now expired. The company is undecided as
to whether to sell or lease it to customers under finance leases. The fair value less
selling costs of the assets is RM18 million and the value is use is estimated at RM24


Discuss the accounting treatment of these assets (as per FRS 5) for the year ended
31 December x5.
(8 marks)

(b) Benjamin had a plant with a carrying value of RM5 million at 3 March x6 which
ceased to be used because of a downturn in the economy. The company decided at 31
March x6, which was its financial year end, to maintain the plant in working condition
in case of a change in economic conditions. Benjamin subsequently sold the plant by
auction on 14 May x6 for RM3 million net of cost


Discuss the accounting treatment of the plant.

(7 marks)
(Total 25 marks)
Question 4

Part A

Revenue from sale of goods should be recognised when FIVE (5) conditions have been
satisfied. List and explain all FIVE (5) of these conditions.

(10 marks)

Part B

How should revenue be recognised for each of the following independent cases?

(i) In December x9 a customer purchased for cash a television set from Media House
Bhd for RM6,000. He wanted it delivered to his parents on 10 January x10 as a gift
for their wedding anniversary.
(ii) Blue Traders deals in antiques. A customer agreed to buy a piece of antique and
agreed to pat 10% of the price over a ten month period. The customer will take
delivery only upon full payment being made.
ACC3201 (F) / Page 6 of 7

(iii) Electronics Bhd sells goods for cash and on interest free instalment basis. A
customer bought an electricity gadget at a net price of RM5,000 and payment is to
be made in ten instalments of RM500 per month
(iv) High Vsion accepted an assignment to arrange for a syndicated loan for Despardo
Bhd on 1 December x9. The loan was secured on 6 April x10. The fee charged by
High Vision was 2% of the loan value. Financial year end is 31 December.
(v) On 1 December x9, Rose Bhd received orders to decorate a palace for a wedding at a
cost of RM200,000. The wedding will be held on 28 March x10. Financial year end
is 31 December.
(Each case carries 3 marks)
(15 marks)
(Total 25 marks)

Question 5

Part A

(a) Distinguish between research expenditure and development expenditure.

(4 marks)

(b) Explain the accounting treatment required by FRS 138 in relation to each of these
types of expenditure.
(Note: Part of your answer should be the conditions that must be satisfied for
development expenditure to be capitalized)
(7 marks)

(c) During the year to 31 July 2012, a pharmaceutical company spent a total of
RM830,000 on research and development. Of this amount, RM370,000 was spent on
an unsuccessful attempt to find a cure for the common cold. The remaining
RM460,000 was spent on the development of a range of cosmetic products. How
should this expenditure be accounted for in the company’s financial statement?
(4 marks)

Part B

Sally’s current year-end was 31 March x9. Its financial statements were authorized for issue
by its directors on 6 May x9 and the annual general meeting will be held on 3 June x9. The
following matters have been brought to your attention.

(a) On 12 April x9 a fire completely destroyed the company’s largest warehouse and the
inventory were RM10 million and RM6 million, respectively. It appears that the
company has not updated the value of its insurance cover and only expects to be able
to recover a maximum of RM9 million from its insurers. Sally’s trading operations
have been severely disrupted since the fire and it expects large trading losses for
some time to come.
(5 marks)
ACC3201 (F) / Page 7 of 7

(b) A single class of inventory held at another warehouse was valued at its cost of
RM460,000 at 31 March x9. In April x9, 70% of this inventory was sold for
RM280,000 on which Sally’s sales staff earned a commission of 15% as at 31 March


Explain the required treatment of the above items by Sally in her financial statements
for the year ended 31 March x9.
(5 marks)
(Total 25 marks)

ACC3201 / Mary.M / Final / Jan 2013