Group project FAR430

BACHELOR OF ACCOUNTANCY (HONOURS)

FAR430 GROUP PROJECT PAPER
SEMESTER: SEPT 2015 JAN 2016
Name
1.
2.
3.
4.
Group: AC220______
_
Total marks: Case 95 marks + Peer Evaluation 5 marks = 100
marks
Instructions to students:
1. Only one answer is required from each group.
2. Write the names of all the group members on the front page of the solution.
3. Each member of the group must complete and submit a peer evaluation form on
12 December 2015.

4. NO marks will be awarded for the entire assignment if any part of it is found to be
copied directly from another group(s). This penalty will be imposed on BOTH the
group who actually did the work and the group who copied.

5. Show ALL workings.

6. Last date for submission is

Semester Sept 2015-January 2016

_19 December 2015__.

Group project FAR430

FAR430 PEER EVALUATION FORM

1. Peer evaluation carries 5 marks.
2. Your peer evaluation form will be rejected if you either give full marks or the same
marks to all group members. You will then lose all the 5 marks.
3. You are required to fold and staple the form for submission to ensure
confidentiality.

Name
:
Student ID No:
Group
: AC220_____
Please evaluate your group members from a scale of 1 to 5 as
follows:
Poor (1)
Unable at all
times

Moderate (2)
Able but
minimum

Items

Satisfactory
(3)
Able but
limitedly

Peers
Name:

Good (4)
Able most of the
times

Peers
Name:

Peers
Name:

Excellent
(5)
Able at all
times

Peers
Name:

1 Cooperation and commitment

(Ability to give cooperation and
commitment in the group)
2 Diligence and perseverance (in
performing task assigned)
3 Organisation and orderliness (Ability
to organize task properly)
4 Technical knowledge and
understanding (Having sound
technical knowledge and
understanding on the matters
concerned)
5 Proactive and able to articulate
constructive ideas when needed
6 Participation in ongoing discussion
(Ability to communicate well within
the group and show good
interpersonal skills)
7 Communication and interpersonal
skills
8 Ability to meet deadlines and
expectation of group members
TOTAL POINTS
Semester Sept 2015-January 2016

Group project FAR430

Semester Sept 2015-January 2016

Group project FAR430

QUESTION
Adam Supply Bhd, a public listed company based in Kuching, has an authorized capital
of 160 million ordinary shares with par value of RM 1.00 each and 100 million 6%
cumulative preference shares of RM1.00 each. The principle activities of the company
include the construction of medical laboratories and selling a wide spectrum of medical
products to various entities including government agencies. The financial year of Adam
Supply Bhd ends on 30 June each year. The board of directors authorized the financial
statement for issue on 30 September 2015. Given below is the trial balance relates to
Adam Supply Bhd as at 30 June 2015 prepared by the companys account assistant.
Debit
RM000
Revenue

Cost of sales

Finance expenses

101,510

80,800

200

Other operating income

Administrative expense

Selling and distribution expenses

Directors emoluments

Construction contract costs

Credit
RM000

690

11,540

7,820

860

21,920

Progress billings

21,550

Property, plant and equipment :

Land at cost 1 July 2014

70,000

Buildings at cost on 1 July 2014

15,000

Semester Sept 2015-January 2016

Group project FAR430

Motor vehicles at cost on 1 July 2014

Equipment at cost on 1 July 2014

600

6,000

Accumulated depreciation on 1 July 2014:

Buildings

1,250

Motor vehicles

200

Equipment

1,800

Trade receivables

16,750

Investments

15,000

Bank

13,900

Dividend paid ( inclusive of preference dividend)

2,000

Retirement benefit obligation on 1 July 2014

Retirement benefit plan assets on 1 July 2014

5,000

2,000

Trade payable

11,970

Ordinary share capital

96,000

6% Cumulative preference shares

20,000

10% Debentures

2,000

Semester Sept 2015-January 2016

Group project FAR430

Share premium (30 June 2015)

7,400

Retained profit (1 July 2014)

2,950

Deferred tax liability

290

Intangible assets

8,000

Inventory ( 30 June 2015)

220

272,610

272,610

Notes:
Basic earnings per share for the year ended 30 June 2014 was 22.4sen.
Additional information:
1. The construction contract cost and progress billings for the year relates to the
construction of three medical laboratories undertaken by the company with Herbal
Research Centre (HRC), Kolej Perubatan Maju (KPM) and Hijau Bhd (HB).
Information relevant to the contracts are as follows:
Date started
Date completed / to
complete
Contract Price
Variation in contract
price
Claim in contract price
Progress billings
invoiced during the
year
Progress billings to 30
June 2014
Revenue recognised to
30 June 2014
Cost incurred and
recognised to 30 June
2014
Cost incurred during
the year ( excluding
variation and claims)
Estimated future costs
Semester Sept 2015-January 2016

HRC
1 January 2015
30 June 2017

KPM
1 March 2015
30 June 2017

HB
1 July 2012
30 June 2015

RM000
5,100
700

RM000
4,000
-

RM000
120,000
-

1,550

20
-

20,000
75,000

75,000

60,000

1,780

140

20,000

3,720

1,080

Group project FAR430

The variation in contract price of HRC is due to changes in the laboratory
specification at the request of HRC. It is highly probably that customer will accept
the variation. The claim is due to negligience by the companys agent and it is
unlikely that the customer will accept the claim. It is the policy of Adam Supply
Bhd to recognize profit on the percentage of completion method measured by
cost to date to total estimated cost. If the percentage of completion is less than
15%, the outcome of the contract is considered as cannot be estimated reliably.
The company has not recorded the effect of these contracts on its profit for the
year and its financial position as at 30 June 2015.
2. On 1 July 2015, it was discovered that a transction related to the acquisition of a
shoplot on 1 December 2014 was completely omitted from the business books.
The purchase price was RM550,000 inclusive the annual maintainance cost of
RM50,000. For tax purposes, the building is entitled to 10% initial allowance and
3 % annual allowance.
3. Land is not depreciated. Depreciation on other property, plant and equipment
are calculated and recorded in the books based on straight line method over their
expected useful lives as follows:
Buildings and premises
40 years
Motor vehicles
15 years
Equipments
20 years
The salvage value for the buildings (excluding the shoplot) was estimated to be
RM 5 million while there is no salvage value estimated for motor vehicles ,
equipments and shoplot.
It is the companys policy to take full years
depreciation in the year of purchase and none in the year of disposal.
4.

In July 2014, Adam Supply Bhd ordered a new equipment from JJ Bhd valued at
RM400,000. The terms of the agreement allows the company to pay for the equipment
either by the issue of 200,000 ordinary shares at market value on 1 November 2014 or
in terms of cash equivalent to the market value of 200,000 ordinary shares on 1 October
2014. The equipment was shipped to the company in August 2014 but only received by
Adam Supply Bhd on 1 September 2014.
The market value of the companys ordinary shares for the month of July,
August, September and October 2014 were RM2.00, RM2.30, RM2.60 and
RM2.90 respectively. In previous years, when the company acquired property,
plant and equipment under similar terms and conditions as the above, it settled
the acquisition by cash. This transaction has not yet been recorded. For taxation
purposes, the equipment is entitled to a 20% initial allowance and a 10% annual
allowance.

5.

All the investment were classified as held-for-trading with a market value of RM17.5
million.

6.

While doing the inventory count, it was found that the closing inventory included
damaged goods costing RM160,000 that was expected to be sold for RM50,000.

7.

On 1 November 2014 , a right issue of 1 for every 3 shares held was made. The
share price immediately before the issue was RM1.40. The issue at RM1.30 per share
was fully subscribed, and accordingly included in equity.
Semester Sept 2015-January 2016

Group project FAR430

8.

In December 2014, the company was sued by one of the employees for damages for
wrongful dismissal. As at 30 June 2015, the companys lawyers are of the opinion that
the employee has a strong case and it is highly probable that the company will lose the
case. The loss is estimated to be RM450,000 and the case is expected to be settled by
September 2015. This transaction has not been incorporated in the books of the
company.
9. On finalizing the financial statements, the accountant discovered that the
intangible assets included research expenditure of RM2,000,000 which was
incurred in March 2014.

10.

The company has a funded defined benefit plan for its employees. However, the
company has not accounted for the transactions related to the retirement benefit plan
made during the year. Below is the information relevant to the scheme for the year
ended 30 June 2015:
RM000
Current service cost
780
Benefits paid
1,320
Contribution paid
5,000
Average service life of employees
10 years
The company used a rate of 10% that reflected the yield of corporate bonds
issued by ABC Bank for discounting purposes while its expected rate of return
from the plan asset is 12%. The present value of obligation and fair value of plan
asset as at 30 June 2014 were estimated by the professional actuary to be
RM10,800,000 and RM8,450,000 respectively. For taxation purposes, retirement
benefit expenses are deductible in the year the benefit is paid.

11.

On 1 October 2014, Adam Supply Bhd granted 10 directors the options to buy 4,000
ordinary shares each at RM2.90 per share. The options vest immediately but the
directors can only exercise their rights on 1 October 2015. The fair value of the option on
the grant date was RM2.90 and the average price of the shares for the year was RM5.
None of the directors had exercised their options as at 30 June 2015. The share options
had not been recognized in the books of accounts.

12.

The tax payable for the year was RM6400,000. The tax rate for the year of 25% was
the same as last years. The rate is not expected to change in year 2016. The deferred
tax liability in the trial balance was before adjustment for the related items in the
additional information.
Required:
Prepare the following statements in accordance to the requirements of the relevant
Malaysian Financial Reporting Standards for publication purposes:
a.

c.
d.

Statement of Profit or Loss and Other Comprehensive Income for the year ended
30 June 2015 ;
b.
Statement of Changes in Equity for the year ended 30 June 2015;
Statement of Financial Position as at 30 June 2015.
Notes to the financial statements (in as far as the information permits) for the following
items:
i. Property, plant and equipment
ii. Amounts due from / (to) customers
Semester Sept 2015-January 2016

Group project FAR430

e.

Compute the following ratios for the company for year 30 June 2015:
i.
Gross profit margin;
ii.
Net profit margin;
iii.
Current ratio; and
iv.
Acid test ratio.

f.

Comment on the ratios calculated in (e) above given the following information:
Ratios
Industry Average
Gross profit margin
25%
Net profit margin
20%
Current ratio
6:1
Acid test ratio
5: 1

Show ALL workings.

(Case: 95 marks)
END OF QUESTION PAPER

Semester Sept 2015-January 2016