UNIVERSITI TEKNOLOGI MARA

GROUP PROJECT (15%) & GROUP PRESENTATION (5%)

COURSE : FINANCIAL ACCOUNTING AND REPORTING 4

COURSE CODE : FAR560

SEMESTER : MARCH - JUNE 2020

INSTRUCTIONS TO STUDENTS

1. This project should be done in a group of FOUR (4) students.

2. Answer all questions from Part A and Part B.

3. For group project, students must submit a hand-written answer.

4. To be submitted by………………

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PART A - GROUP PROJECT (15%)

QUESTION 1

Blue Farming and Milk Industry Bhd (BFM Bhd) is a public listed company,established in 2000.
The company was incorporated in Malaysia, involved in dairy farming, manufacturing and
distributing of dairy products.

The following balances are for the year ended 30 June 2019.

  Note Dr Cr
    RM'000 RM'000
Sales     25,000
Cost of sales   11,800  
Administration expenses   6,020  
Selling and distribution expenses   1,200  
Finance costs   265  
Land (at revaluation) 2 11,000  
Buildings (at revaluation) 2 32,000  
Equipment 1 5,200  
Machine A 1 4,050  
Machine B   18,100  
Motor vehicles   2,640  
Fixtures and fittings   628  
Goodwill 1 750  
Accumulated depreciation as at 1 July
2018:      
Buildings 2   3,840
Equipment 1   988
Machine A 1   770
Machine B     1,905
Motor vehicles     792
Fixtures and fittings     251
Biological assets 3 940  
Investment properties   4,000  
Investments   2,100  
Intangible assets 5 794  
Tax paid   277  
Accounts receivable   2,320  
Inventories   510  
Bank balances   447  
Ordinary shares     45,000
5% Cumulative preference shares     10,000
Retained profits     9,280
Revaluation reserve (land) 2   450

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 8% Debentures     5,000
Deferred income 4   300
Accounts payable     1,760
Accruals     230
Interim dividend 6 525  
    105,566 105,566

The following notes are related to the balances given above:

1. On 1 July 2016, BFM Bhd acquired King Manufactures Sdn Bhd. During the acquisition, the
equipment and machine A were revalued at RM5,200,000 and RM4,050,000 respectively.
The agreed purchase consideration for the assets was RM10,000,000. The goodwill is
derived from the acquisition.

Some technical problems had caused both assets to be less productive during the financial
year ended 30 June 2018. As at 30 June 2018, it was estimated that the expected value in
use amounted to RM7,000,000. BFM Bhd determined that if the equipment and machine A
were to be sold, the market value would be RM7,200,000. The cost to sell them was
estimated at 5.5% of the fair value.

For the financial year ended 30 June 2019, BFM Bhdhad conducted a major inspection on
the equipment and machine A. The company also did some intensive technical adjustment
to improve the capacity of the plants. Due to this reason, it was expected that the value in
use would be increased by 5% as compared to the year ended 30 June 2018 projection and
the net selling price was estimated to be RM7,200,000.

It is the company’s policy to depreciate equipment and machinesat 10% on carrying amount.
Machine A has a salvage value of RM50,000. The depreciations of equipment and
machines are part of cost of sales. Goodwill has indefinite useful life.

2. The building was revalued for the first time on 1 July 2015 where the revaluation result in a
deficit of RM150,000. The remaining useful life of the building for on 1 July 2015 was 25
years. The building was revalued on 1 July 2018 at RM32,500,000.

The land was also revalued for the first time on 1 July 2015 at a surplus. The fair value of
the land drop to RM10,000,000 on 30 June 2018, but was never recorded by the company.

The land is not depreciated. The motor vehicles, and fixtures and fittings are depreciated on
straight line basis at 10% per annum.

3. BFM Bhd has a farm in Betong area where they breed 300 1-year old and 400 1.5-year old
dairy cattle. The amount of RM940,000 was the fair value less cost to sell as at 1 July 2018.
On 1 January 2019, the company had 50 newborn cattle that were valued at RM550 per
newborn at fair value less cost to sell.

On 30 June 2019, the fair value of the cattle (excluding newborn) was RM1,150,000. The
fair value less cost to sell of a newborn and a 6-months old cattle were RM570 and RM670
respectively at that date. During the year, the related cost to sell a cattle was RM120.

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4. A government grant was received 10 years ago after the company complied with condition
on setting up the dairy cattle farm. The balance of the deferred income has yet to be
amortised for another 5 years.

5. Included in the amount of intangible assets was a research carried out by the company on 1
February 2019 amounting RM14,000.

6. The interim dividend paid for the year included half year dividend for 5% cumulative
preference shares. The finance cost represents interest on debentures.

7. The tax expense for the year was RM542,000.

Required:

a. Determine the carrying amount of each of the assets of the cash generating unit as at 30
June 2018 and 30 June 2019. Show the computation of the impairment loss and reversal
of impairment loss.
(10 marks)

b. Prepare the journal entries to record the transactions based on note no.2.
(5 marks)

c. Based on note no.3, calculate

i) the total gain/loss in fair value less cost to sell of the cattle (including the
newborn) for year ended 30 June 2019.
ii) Analyse the changes in fair value less cost to sell of the newborn cattle due to
physical change and price change for the year ended 30 June 2019.
(5 marks)

iii) Prepare the following financial statements in a form suitable for publication:
i. Statement of profit or loss and other comprehensive income for the year ended
30 June 2019.
ii. Statement of changes in equity for the year ended 30 June 2019.
iii. Statement of financial position as at 30 June 2019.
iv. Notes to disclose the movement in the company’s property, plant and equipment.
(35 marks)

iv) Evaluate the following ratios of Blue Farming and Milk Industry Bhd for the year
ended 30 June 2019.
i. Current ratio
ii. Quick ratio
iii. Gross profit margin
iv. Net profit margin
(10 marks)

Show all necessary workings. Round up your answer to the nearest unit RM’000.

(Total: 65 marks)

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QUESTION 2

Fine Lumber Bhd has identified the following states as its reportable segments for the year
ended 31 December 2019.The following information relates to the states with details of their
revenue,results and assets.

Selangor RM’000
Sales to Pahang 206,080
Other sales to Kelantan 55,000
Export sales to Middle East 303,900
Export sales to Singapore 72,600

Sarawak
Sales to Johor 32,000
Export sales to Brunei 195,900
Export sales to Singapore 213,700

Johor
Export sales to Canada 130,000

Other segments(Pahang and Sabah)

Other sales to Perak 33,000
Export sales to Brunei 74,320

Head Selangor Sarawak Johor Others

Office
RM’000 RM’000 RM’000 RM’000 RM’000
Results - 165,400 18,750 (8,300) (4,200)
Unallocated expenses 92,800
Finance costs 10,940
Assets 50,070 200,920 41,600 13,000 7,800
Liabilities 47,800 111,800 39,000 22,330 9,750

Tax expense for the year were RM1,125,000.

Required:

a) Prepare a segmental report in accordance with MFRS8 Operating Segments for Fine
Lumber Bhd.
(15 marks)

b) Compare the use of10% quantitative threshold test with the 75% revenue constraint in
determining reportable segment.
(5 marks)
(Total: 20 marks)

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QUESTION 3

QuenaBuilders Bhd prepares its interim report on a quarterly basis. Its current financial year
ends on 30 June 2019. The business bought two excavators costing RM185,000 each on 1
January 2019. The company paid other direct costs related to the purchase of the excavators
amounting RM25,000. The excavatorsare depreciated using straight line method on a monthly
basis and its expected to be used for 10 years.

Required:

a) State the minimum disclosure requirement of an interim reporting based on MFRS134

Interim Financial Reporting.
(5 marks)

b) Determinethe reporting periods for interim and comparative financial reports for statement of
financial position for second and third quarter for the financial year ended 30 June 2019.
(5 marks)

c) Discuss the accounting treatment on the recognition and measurement principles applicable
for the above transaction in the preparation of the interim report for the third and fourth
quarter.
(5 marks)
(Total: 15 marks)

Grand Total: 100 marks

PART B - GROUP PRESENTATION (5%)

1. Students are to form a group of 4 people.

2. Each group is required to :

a. Watch a video at https://www.youtube.com/watch?v=e5ZK9gJA5sM

b. Based on the video, answer the following questions.

i. Identify the relevant accounting standards that can be applied to the
activity.
ii. Identify the biological asset, the agricultural produce and the product that
is the result of processing after harvest.
iii. Explain briefly the importance of the biological asset to the entity.
iv. Explain the recognition criteria of the biological asset.
v. Is the biological asset a bearer or a consumable asset? State your
reasons.
vi. Discuss the agricultural activity that is managed by the entity.
vii. Explain the measurement basis for the biological asset and the
agricultural produce.
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 viii. Is the biological asset classified as current asset or non-current asset?
State your reasons.
ix. List down 3 examples of biological asset that has similar criteria as
identified in (ii) above.
x. Explain briefly the types of government grant that can be applied by the
entity to its activity.

c. Present your findings in the power point. Maximum number of slides is 15.

3. Each group will be assessed for their presentation findings according to the following rubric:

RUBRIC FOR GROUP PRESENTATION

CRITERIA MARK EXCELLENT GOOD SATISFACTORY POOR

S

EXPLANATION The group able The group able The group able to
The group unable
OF THE to show deep to show good show satisfactory
to show
FINDINGS understanding understanding understanding satisfactory
and able to and able to apply and unable to understanding
apply MFRS141 MFRS141 in their apply MFRS141 and unable to
in their presentation of in their apply MFRS141
presentation of the findings. presentation of
in their
the findings. the findings. presentation of
the findings.
30 30 25 20 15
POWER POINT The group uses The group uses The group uses The group uses
DESIGN AND power point, power point, power point but power point, not
CREATIVITY attractive, and attractive, but no do not display attractive and do
exhibit excellent creativity in creativity in not display
creativity. presentation of presentation of creativity in
findings. findings. presentation of
findings.
10 10 8 6 4
QUESTION The group able The group able The group able to Unable to answer
AND ANSWER to answer all to answer 8 answer 6 questions
questions questions questions correctly.
correctly. correctly. correctly.
10 10 8 6 4
TOTAL MARKS 50

END OF QUESTION PAPER