CONFIDENTIAL AC/FEB 2017/FAR210

UNIVERSITI TEKNOLOGI MARA

COMMON TEST 1

COURSE : FINANCIAL ACCOUNTING 3

COURSE CODE : FAR210
EXAMINATION : 10 FEBRUARY 2017
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of three (3) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) an Answer Booklet

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed pages

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CONFIDENTIAL 2 AC/FEB 2017/FAR210

QUESTION 1

a. The Securities Commission is a self-funding public statutory body which was

established under the Securities Commission Act 1993. It has investigative and
enforcement powers and report to Minister of Finance.

Required:
i. Identify the type of entity that must apply the Securities Commission guidelines
(1 mark)

ii. Briefly discuss the main functions of Securities Commission.

(2 marks)

b. The Audit Oversight Board (AOB) is established under Part 111A of the Securities
Commission Act 1993. Explain its scope of power.
(2 marks)

c. In 1997, the Malaysian Accounting Standards Board (MASB) was established to take
over the role of standard setting in Malaysia.

Required:

i. Name TWO (2) accountancy bodies responsible for issuing accounting

standards prior to 1997.
(2 marks)

ii. State THREE (3) functions of Malaysian Accounting Standards Board (MASB).
(3 marks)
(Total: 10 marks)

QUESTION 2

a. The objective of General Purpose Financial Reporting prescribed in the Conceptual

Framework is to provide information about reporting entity that is useful to existing and
potential investors, lenders and other creditors in making decisions about providing
resources to the entity.

Briefly explain the term “information on reporting entity”

(3 marks)

b. The Malaysian Accounting Standards Board‟s (MASB) Conceptual Framework for

financial reporting identifies Faithful Representations as one of the fundamental
qualitative characteristics for information to be useful to the users.

Explain briefly THREE (3) characteristics of Faithful Representation.

(3 marks)

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CONFIDENTIAL 3 AC/FEB 2017/FAR210

c. Measurement is concerned with “how much” an entity allocates to amounts recognized

as elements in the statement of financial position or income statement.

List measurement bases acknowledged by Framework to be used in financial

statements.
(2 marks)

d. Millions Berhad has several branches of bookstore in Melaka. The board of directors
of the company are contemplating to diversify its business into rental and retailing of
photocopy machines. The accountant of the company has proposed the acquisition of
20 units of photocopy machines. 10 units are meant to be rented out to customers,
while the remaining units are for sale. The machines to be rented out are estimated to
generate income for a period of 10 years. As at the year end, no action has been taken
on the proposal.

i. In accordance to the Conceptual Framework, define assets.

(3 marks)

ii. Discuss whether the photocopy machines are assets of the company.
(4 marks)
(Total: 15 marks)

Question 3

Jengka Indah Sdn Bhd is a furniture manufacturer located in Bandar Jengka. Due to
increase in the demand of their newly designed furniture, the company decided to build a
new plant. The construction started on 1 January 2015, and completed within 12 month. The
new plant was first used on 1 April 2016 and expected to be used for 10 years.

The plant was constructed using the company‟s own resources, which includes:

RM
Direct material 2,560,000
Direct labour 1,500,000
General administrative overheads 300,000
Direct overheads 500,000
Materials wastage 60,000
Engineer and architect fees 250,000

The company decided to provide the depreciation on the new plant at 10% per annum on its
cost, based on monthly basis. Jengka Indah Sdn Bhd closes its books on 31 December each
year.

Required:

a. Identify whether the new constructed plant is as an asset of the company.

(3 marks)

„
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CONFIDENTIAL 4 AC/FEB 2017/FAR210

b. Describe whether the new plant is an item of property, plant and equipment in
accordance with MFRS 116 Property, Plant and Equipment.
(4 marks)

c. i Identify any THREE (3) components of costs of a self-constructed property, plant

and equipment.
(3 marks)

ii Compute the initial cost of the new plant constructed by Jengka Indah Sdn Bhd
(3 marks)

d. i Explain the term „depreciation‟.

(3 marks)

ii Calculate the depreciation of the new plant as at 31 December 2016.

(2 marks)

iii. Briefly described any TWO (2) factors that may limit the useful life a PPE.
(2 marks)

e. In the year ended 2016, Jengka Indah Sdn Bhd incurred further costs of enhancing
and maintaining the plant to ensure that it is in proper condition. These costs include
renovation, general cleaning and repainting, which is considered as subsequent costs
of the plant.

Discuss the two treatments of the subsequent costs above.

(5 marks)
(Total 25 marks)

END OF QUESTION PAPER

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