Assignment BUS 1233

Dear students,

As promised and the one that you've been waiting for a long time....Now I give you an ASSIGNMENT for this semester....

Remember, please submit on time or I'll trash it!

Exercises - MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors

    QUESTION 1

      MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors prescribes the criteria for selecting and changing accounting policies, together with the accounting treatment ad disclosure of changes in accounting policies, changes in accounting estimates and correction of errors.

Required:

State any four (4) errors that may arise when preparing the financial statements.

QUESTION 2

       The retained earning account in the books of Zuligg Bhd showed an opening balance of RM 243,000 as at 1 July 2015. During accounting year ended 30 June 2016, situations below were identified:

1.   On 5 June 2016, it was identified that the acquisition of office equipment worth RM40,000 on 1 July 2014 was mistakenly treated as repair and maintenance. It is the company’s policy to depreciate office equipment at 10% on cost.

2.   Zuligg Bhd adopted the weighted average method to value its inventory. Starting from 1 July 2015 the company decided to change to First-in-First-out method. On 30 June 2016, it was found that the year-end closing stock valuation was still using the old method. This has caused the closing inventory to be understated by RM 150,000.

3.   Zuligg Bhd bought a machine on 1 July 2011 which has an estimated useful life of 10 years. On 1 July 2015, the company decided to revise the useful life to 8 years. The carrying value      of this machinery as at 1 July 2015 is RM 20,000. The company adopts straight line method to compute its annual depreciation.

Required:

a.   For each of the above situations, determine whether it is a change in accounting policy, a change of accounting estimates or an error.

b.   Ascertain whether the application of change as all the above situations should be adjusted retrospectively or prospectively.

c.   Prepare the appropriate journal entries to be taken into account for all the above situations   for the accounting year ended 30 June 2016.

Exercises - MFRS 102 Inventories

QUESTION 1

      Hakim Global Ventures Berhad (HGV) is a company dealing with imported continental cars in Pinggiran Batu Caves. The company imported two (2) cars, Keteku and Ketemu. Before the two cars made available for sale, the company decided to modify them and the costs incurred are as below:

	Keterku	Ketermu
Purchase price	220,000	250,000
Import duties	11,000	15,000
Handling/Storage cost	25,000	20,000
Carriage cost to sell	18,000	20,000
Estimated selling price	295,000	300,000

Required:

           State if Keterku and Ketermu are items of inventories for HGV Berhad. 

          

          List THREE (3) conditions that may lead to company writing down its inventories to net realisable value. 

          

          Determine the value of cars to be disclosed in the Statement of Financial Position in accordance with MFRS 102 Inventories.  

          

QUESTION 2

      On 2 April 2018, Safuan Maju Bhd purchased 2 units of machines at a total cost of RM150,000. In addition, the company incurred installation cost of RM15,000, insurance cost of RM12,000 and transportation cost of RM8,000 for both machines. Both machines have a eight-year economic life and a total salvage value of RM25,000. The company uses straight line of depreciation on monthly basis. Safuan Maju Bhd closes its book on 31 December each year.

Required:

a)    Explain the initial cost of the machines to be recognized in the Statement of Financial Position.                                                                                      

b)    Compute the initial cost of the machines.                                              

c)    Calculate the depreciation expense for both machines as at 31 December 2018.

                                                                                                          

QUESTION 3

      Farisha Phone Services (FPS) specializes in buying and selling mobile phones in a small town in the Seri Gombak area. The company is using FIFO method in determining the cost of its inventories. Below are transactions regarding the purchases and sales of mobile phones for the month of June 2018:

Date	Transactions
June 3	Purchased 5 mobile phones at RM500 each
8	Sold 2 mobile phones at RM550 each
15	Purchased 5 mobile phones at RM510 each
20	Sold another 4 mobile phones at RM600 each

Required:

a)    List the components to the cost of inventories as prescribed by MFRS 102 Inventory.

      

b)    State whether the mobile phones are inventory of FPS in accordance with MFRS 102 Inventory.                                                                                    

c)    Prepare a Store Ledger Card to determine the value of mobile phones as at 30 June 2018 using the following format:               

                                  

Date	Receipts			Issues			Balance
	Qty	Price	Amount	Qty	Price	Amount	Qty	Price	Amount

Relevant Cost - Keep or Replace

RELEVANT COST – KEEP OR REPLACE

Faridzwan drives and owns his own taxi cab (Grab). He is considering replacing his old cab with a new more efficient hybrid model. Below is some information related to the decision.

	Old Cab RM	New Hybrid Cab RM
Original cost new	25,000	30,000
Accumulated depreciation	5,000
Salvage value	10,000
Annual operating cost	20,000	15,000

He expects both his old cab and the new hybrid cab would be useful for 6 years from now.

Required:

Determine the advantage or disadvantage of purchasing the new hybrid cab

Relevant Cost - Special Order

RELEVANT COST – SPECIAL ORDER

The Irman Corporation makes small decorative lamps. These lamps have the following cost structure.

Selling price	RM20.00
Variable cost per unit	RM13.00
Fixed cost per unit	RM3.00

The regular production is 20,000 units per month. The maximum number of lamps can be produces in the plant is 32,000 per month.

A foreign company has asked for a special order of 5,000 units at a price of RM15.00 per unit.

Required:

Should Irman Corp accept the special order? How much additional income will be materialized by taking the offer?

RELEVANT COST – SPECIAL ORDER

The Shitah Company makes special paper pants. These pants have the following cost structure.

Selling price	RM7.00
Variable cost per unit	RM3.50
Fixed cost per unit	RM1.75

The regular production is 8,000 units per month. The maximum number of pants can be produces in the plant is 10,000 per month.

A foreign company has asked for a special order of 1,000 units at a price of RM6.00 per unit. An additional shipping cost of RM1.00 per unit will be incurred of the special order is accepted.

Required:

Should Shitah Company accept the special order? How much additional income will be realized by taking the special order?

RELEVANT COST – SPECIAL ORDER

The Nsahsna makes small miniature toys from cloth. These toys have the following cost structure.

Selling price per unit	RM15.00
Direct material per unit	RM4.00
Direct labour per unit	RM1.80
Variable overhead per unit	RM1.20
Fixed overhead per unit	RM1.00
Variable selling expenses per unit	RM1.50

A foreign company has asked for a special order of 500 units at a price of RM10.00 per unit. Nshasna has the excess capacity to complete this special order withour impacting regular production. No selling expenses will be incurred for the special order.

Required:

Should Nsahsna accept the special order? How much additional income will be realized by taking the special order?

RELEVANT COST – SPECIAL ORDER

Kathy Company manufactures and selss a single product called a Yow. Operating at capacity, the company can produce and sell 45,000 Yows per year. Cost associated with this level of production and sales are as follows:

	Per Unit RM	Total RM
Direct materials	22	990,000
Direct labour	12	540,000
Variable manufacturing overhead	4	180,000
Fixed manufacturing overhead	14	630,000
Variable selling overhead	8	360,000
Fixed selling overhead	9	405,000
Total Cost	69	3,105,000

The Yows normally sell for RM75 each. Fixed manufacturing overhead is constant at RM630,000 per year within the range of 35,000-45,000 Yows per year.

Required:

Next year, Kathy Company expect to sell only 40,000 Yows. A large retail chain has offered to purchase 5,000 Yows if Kathy is willing to accept a 20% discounts from the regular price. There would be no sales commission on this order, and thus, variable selling expenses would be slashed by 75%. However, Kathy Company would have to purchase a special machine to engrave the retail chain’s name on the 5,000 units. This machine would cost RM40,000. The company has no assurance that the retail store would purchase additional units at any time in the future. Determine the impact on profits next year if the special order is accepted. (Show your workings)