CHARTERED TAX INSTITUTE OF MALAYSIA (225750 T)

(Institut Percukaian Malaysia)

PROFESSIONAL EXAMINATIONS

INTERMEDIATE LEVEL

FINANCIAL ACCOUNTING

PILOT PAPER

ANSWERS
 CTIM: Financial Accounting

Question 1 (30 marks): DIY Ria Berhad

Statement of profit or loss and other comprehensive income for the year ended 31 December

2013

RM000
Revenue 382,500
COS
(197,775)
Gross profit 184,725
Administration expenses 67,500 – 900 + 750 + fraud (69,600)
2,250
Distribution expenses (81,000)
Finance cost 2,400 + 3,000 (5,400)
FV – gain on IP 6,000
Profit before tax 34,725
Income tax 6,000 + 3,750 (9,750)
Profit for the year 24,975
Other comprehensive income
Revaluation of land 7,500
Deferred tax (1,875) 5,625
Total comprehensive income for the year 30,600

Statement of changes in equity for the year ended 31 December 2013

Equity Share Revaluation Retained Total

premium reserve profits
RM’000 RM’000 RM’000 RM’000
Balance at 225,000 15,000 78,000 318,000
01.01.2013
PPA (750) (750)
Restated 225,000 15,000 77,250 317,250
balance
Rights issue 3,000 7,500 10,500
Revaluation of 5,625 5,625
land
Dividends paid (11,250) (11,250)
Profit for the 24,975 24,975
year//
Balance at 228,000 22,500 5,625 90,975 347,100
31.12.2013
Statement of financial position as at 31 December 2013

RM’000
Non current assets (NBV)
Land and building 172,500 – 3,000 169,500
Plant and machinery 105,000 - (4,875 + 45,000) 55,125
Vehicles 67,500 – (27,000 + 5,400) 35,100

Investment property 60,000

Current assets
Inventories 95,100
Accounts receivable 24,000 + 7,500 -3,000 -750 27,750
Bank 12,000
Insurance claim receivable 3,000

Total assets 457,575

Equity 228,000
Share premium 22,500
Revaluation reserve 5,625
Retained profits 90,975

Non current liabilities

8% redeemable preference shares 30,600
8% Loan 30,000
Deferred taxation 13,125

Current liabilities
Accounts payable 27,000
Accrued interest on loan 2,400
Tax payable 750
Liability to Fast Finance 6,600

Total equity and liabilities 457,575

Workings

1. COS RM’000
As per trial balance 202,500
Self constructed asset (15,000)
Depreciation:
P/M90,000 x 5 % 4,500
Self constructed P/M 15,000 x 5% x 6/12 375
Vehicles 67,500 x 8% 5,400
Buildings 150,000 x 2% 3,000
Goods lost during fire (3,000)

197,775

2. Deferred taxation RM’000

As per trial balance 7,500
OCI (Land) 1,875
P/L 3,750
Adjusted balance 13,125

3. Land & Building

Land Building Total

RM’000 RM’000

Cost 37,500 150,000 187,500

Depreciation - (22,500) (22,500)

CV 37,500 127,500 165,000

FV 45,000 127,500 172,500

Surplus 7,500 0
 Question 2 (25 marks): A-L Enterprise

(a) Statement of Affairs: as at 1 January 2013

Assets
Non current assets 28,000
Prepaid operating expenses 1,500
Trade receivables 72,000
Inventories 36,000
Cash in Hand 8,000
Cash in Bank 10,000 155,500

Less: Liabilities
Accrued rent 1,000
Trade payables 45,000 46,000
Capital 109,500

(b) Statement of Profit or Loss and other Comprehensive Income

Year ending on 31 December 2013

Sales (W-1) 329,400

Less: Sales returns (3,000)
326,400
Less Cost of sales
Inventories (01/01/2013) 36,000
Purchases (W-2) 207,900
Less: Purchases returns (3,800)
Inventories (31/12/2013) (30,000) (210,100)
Gross profit 116,300
Add: Discount received 1,100
117,400
Less: Expenses
Operating expenses (W-3) 20,900
Rental (W-4) 15,400
Employees’ salaries 24,000
Bad debts 2,600
Discount allowed 800
Depreciation: non current assets (W-5) 3,000 66,700
Net profit 50,700
 (c) Statement of Financial Position
As at 31 December 2013

Non current assets 55,000

Current assets
Cash in Bank 53,300
Cash in hand 8,500
Inventories 30,000
Trade receivables 50,000
Prepayments 2,300 144,100
199,100

Current liabilities
Trade payables 58,000
Accruals 2,000 60,000

Owner’s equity
Capital (01/01/2013) 109,500
Add: Net profit 50,700
160,200
Less: Drawings (W- 6) (21,100) 139,100
199,100

Workings

W-1: Sales
Trade receivables (31/12/2013) 50,000
Sales returns 3,000
Bad debts 2,600
Discount allowed 800
Receipts from trade debtors 300,000
356,400
Less: Trade receivables (01/01/2013) (72,000)
Sales to credit customers 284,400
Add: Cash sales 45,000
Total sales 329,400

W-2: Purchases
Trade payables (31/12/2013) 58,000
Purchases returns 3,800
Discount received 1,100
Payments to trade creditors 180,000
242,900
Less: Trade payables (01/01/2013) (45,000)
197,900
Add: Cash purchases 12,500
210,400
Less: Drawing (trading stock) 2,500
Total purchases 207,900

W-3: Operating expenses

Payments (Bank) 13,700

Payments (Cash) 8,000
Add: Prepaid 1,500
(01/01/2013)
Less: Prepaid (2,300)
(31/12/2013)
20,900

W-4: Rental expenses

Payments (Bank) 24,000

Add: Accrued (31/12/2013) 2,000
Less: Accrued (01/01/2013) (1,000)
25,000
Less: Rental: family’s apartment (9,600)
15,400

W-5: Depreciation

Non current assets (01/01/2013) 28,000

Add: Purchased in 2013 30,000
Less: Non current assets (31/12/2013) (55,000)
Depreciation 8,000

W-6: Drawings

Drawings (bank) 9,000

Drawing (trading stock) 2,500
Rental: family’s apartment 9,600
21,100
 Question 3 (20 marks): CTH Venture

(i) Statement of Profit or Loss and other comprehensive income

for the year ending 31 December 2013.

Sales 450,000
Less Cost of sales
Inventories (01/01/2013) 45,800
Purchases 220,000
Inventories (31/12/2013) (48,000) (217,800)
Gross profit 232,200
Less: Expenses
Operating expenses (W-1) 42,520
Employees’ salaries 75,000
Interest (bank loan) (W-2) 3,000
Depreciation (W-3) 14,580 135,100
Net profit 97,100

(ii) Statement of Appropriation of Profit or Loss for the year ending 31 December 2013.

Net profit 97,100

Add: Interest on partners’ drawings
Chan 1,000
Teoh 4,000
Heng 500 5,500
102,600
Less: Interest on partners’ capital
Chan: 8% x 50,000 4,000
Teoh: 8% x 40,000 3,200
Heng: 8% x 30,000 2,400 9,600

Partners’ salaries
Chan 24,000
Teoh 6,000
Heng 24,000 54,000

Profit available for distribution 39,000

Partners’ share of profit

Chan: 39,000 x 3/6 19,500
Teoh: 39,000 x 1/6 6,500
Heng: 39,000 x 2/6 13,000 39,000
 (iii) Partner’s Current Account (using the “T” account format).

Current A/C: Chan

Balance b/d 14,000
Interest on drawings 1,000 Interest on capital 4,000
Drawings: cash 7,000 Salary 24,000
Balance c/d 53,500 Share of profit 19,500
61,500 61,500
Balance b/d 53,500

Current A/C: Teoh

Balance b/d 4,000
Interest on capital 3,200
Interest on drawings 4,000 Salary 6,000
Drawings: repairs to motor 3,000 Share of profit 6,500
vehicle
Drawings: cash 20,000 Balance c/d 7,300
27,000 27,000
Balance b/d 7,300

Current A/C: Heng

Balance b/d 5,000
Interest on drawings 500 Interest on capital 2,400
Drawings 3,000 Salary 24,000
Balance c/d 30,900 Share of profit 13,000
39,400 39,400
Balance b/d 30,900
 (iv) Statement of Financial Position As at 31 December 2013

Non current assets (cost) 180,000

Less: Allowance for depreciation (W-3) (48,780)
131,220
Current assets
Cash in Bank 44,000
Inventory 48,000
Trade receivables 68,000 160,000
291,220
Current liabilities
Trade payables 58,000
Accrual: bank interest (W-2) 600
Accrual: operating expenses 5,520 64,120

Non current liabilities

Bank loan 30,000

Equity
Partners’ capital
Chan 50,000
Teoh 40,000
Heng 30,000 120,000

Partners’current A/C
Chan 53,500
Teoh (7,300)
Heng 30,900 77,100
291,220

W-1: Operating expenses

Paid 40,000
Add: Accrual (31/12/2013) 5,520
Less: Drawings: private repairs (3,000)
42,520

W-2 Interest (Bank loan)

10% x 30,000 3,000

Paid 2,400
Interest due 600

W-3: Depreciation

Non current assets: cost 180,000

Less: Allowance for depreciation 34,200
Net book value 145,800
Depreciation: 10% x 145,800 14,580
 Allowance for depreciation
Balance before depreciation for 2013 34,200
Add: Depreciation for 2013 14,580
Balance after depreciation for 2013 48,780

Question 4 (20 marks): Sun-Ray Sdn Bhd

Statement of cash flows for the year ended 31 December 2013

Cash flows from operating activities

Profit before taxation 375,642
Adjustments for:
Depreciation 32,700
Gain on disposal of plant (2,700)
Gain on investment (1,875)
Investment income (1,314)
Interest expense 10,593
Operating profit before working capital changes 413,046
Increase in inventory (9,417)
Increase in receivables (56,556)
Decrease in payables (32,151)
Cash generated from operations 314,922
Interest paid (10,593)
Income tax paid (64,719)
Net cash from operating activities 239,610
Cash flows from investing activities
Investment income received 1,314
Proceeds from sale of plant 4,950
Purchase of property, plant and equipment (289,821)
Sales of investments 16,875
(266,682)
Cash flows from financing activities
Dividend paid (78,000)
Proceeds from issue of shares 140,019
Redemption of debentures (27,000)
Net cash from financing activities 35,019
Net increase in cash and cash equivalents 7,947
Cash and cash equivalents at the beginning of period 16,203
Cash and cash equivalents at the end of period 24,150

[End of marking scheme]