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Answer ALL TWO (2) compulsory questions.
LG Steel Bhd. (LG Steel) is a company active in downstream steel product manufacturing and trading. As part of its expansion plan, LG Steel acquired 90% of the ordinary shares of AT Steel Sdn. Bhd. (AT Steel) on 1 January 2024. Subsequently, on 1 July 2024, AT Steel purchased 60% of the ordinary shares of RG Steel Sdn. Bhd. (RG Steel).
The statements of financial position of LG Steel, AT Steel and RG Steel as at 31 December 2024 are as follows:
| LG Steel | AT Steel | RG Steel | |||
| RM’000 | RM’000 | RM’000 | |||
| ASSETS | |||||
| Non-current assets | |||||
| Property, plant and equipment | 230,810 | 56,530 | 107,970 | ||
| Investments in : AT Steel | 158,000 | – | – | ||
| : RG Steel | – | 112,800 | – |
| 388,810 | 169,330 | 107,970 |
| Current assets | ||||||
| Inventories | 11,800 | 8,850 | 6,490 | |||
| Trade receivables | 17,700 | 7,080 | 5,880 | |||
| Cash and bank | 12,390 | 10,620 | 11,820 |
41,890 26,550 24,190
Total assets 430,700 195,880 132,160
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Ordinary shares | 295,000 | 118,000 | 59,000 | ||
| Revaluation reserves | 29,500 | 23,600 | 18,280 | ||
| Retained earnings | 51,330 | 21,240 | 25,970 |
| Non-current liabilities | ||||||
| Loan notes | 11,800 | 5,900 | 2,950 |
| Current liabilities | ||||||
| Trade payables | 34,810 | 23,010 | 23,600 | |||
| Accruals | 2,950 | 1,770 | 590 | |||
| Tax payable | 5,310 | 2,360 | 1,770 |
43,070 27,140 25,960
Total equity and liabilities 430,700 195,880 132,160
Question 1 (Continued)
The following information is relevant to the preparation of the group financial statements:
Required:
Prepare the consolidated statement of financial position of LG Steel Bhd. Group as at 31 December 2024 in accordance with International Financial Reporting Standards.
[Total: 30 marks]
(A) Irex Bhd. (Irex) is a Malaysia-based company engaged in manufacturing machinery for food processing companies. On 1 December 2023, Irex entered into a contract with JFood Sdn. Bhd. (JFood) for the production of a machine. It took one year to produce the machine. As at 30 November 2024, JFood had inspected and accepted the machine. However, JFood has requested that the machine to be stored at Irex’s warehouse. JFood has legal title to the machine and the machine can be identified as belonging to JFood. Irex stores the machine in a separate section of its warehouse and the machine is ready for immediate shipment at JFood’s request. Irex does not have the ability to use the machine or direct it to another customer.
Required:
Assess whether Irex Bhd. should recognise the revenue in respect of the above machine for the year ended 30 November 2024 in accordance with IFRS 15/ MFRS 15 Revenue from Contracts with Customers.
(10 marks)
(B) Royal Bhd. (Royal) is primarily involved in the sale of health-oriented and wellness consumer products. On 1 January 2024, Royal acquired an item of office equipment costing RM2 million. Royal depreciates its office equipment at 20% per annum using the straight-line method. Capital allowance of the office equipment for tax purposes is 25% per annum. Revenue generated by the office equipment is taxable. The current tax rate is 24%.
Required:
Assess, with relevant calculations, whether a deferred tax liability should be recognised in respect of the above office equipment for the year ended 31 December 2024 in accordance with IAS 12 / MFRS 112 Income Taxes.
(10 marks)
[Total: 20 marks]
SECTION B (50 marks)
Answer ALL TWO (2) compulsory questions.
(A) Harta Bhd. (Harta) is a trading, marketing, warehousing, distribution, and service organisation in
Malaysia. It has four operating segments, namely Trading, Warehousing, Distribution and Services.
The financial information for the operating segments for the year ended 31 October 2024 is as follows:
| Trading | Warehousing | Distribution | Services | |
| RM’000 | RM’000 | RM’000 | RM’000 | |
| Revenue from external customers | 140,000 | 160,000 | 11,230 | 6,420 |
| Inter-segment revenues | – | 5,000 | – | 830 |
| Non-current assets | 700,000 | 430,000 | 5,600 | 3,800 |
| Inventories | 20,800 | 16,500 | 500 | 300 |
| Non-current liabilities | 105,600 | 150,800 | 2,500 | 5,800 |
| Current liabilities | 80,200 | 70,200 | 900 | 700 |
| Cost of sales | 56,400 | 66,700 | 7,100 | 5,000 |
| Operating expenses | 22,800 | 33,200 | 2,300 | 1,200 |
| Quick ratio | 2.1:1 | 2.8:1 | 1.3:1 | 1.6:1 |
Required:
Prepare a segment report of Harta Bhd. for the year ended 31 October 2024 assuming that only the Trading and Warehousing segments are identified as reportable segments in accordance with IFRS 8 / MFRS 8 Operating Segments.
(14 marks)
(B) NR Plantation Bhd. (NR Plantation) is engaged in the cultivation of rambutan tree plantations. The rambutan trees are mainly planted for their fruits. They can produce rambutan fruits up to 30 years. The rambutan trees will be felled when the rambutan trees no longer bear fruits. The wood of the felled rambutan trees can be sold as scrap. For the year ended 30 September 2024, NR Plantation had harvested rambutan fruits from the rambutan trees. The directors of NR Plantation are seeking your advice on the accounting treatments for the rambutan trees and rambutan fruits.
Required:
Assess, with reasons, whether the rambutan trees and rambutan fruits of NR Plantation Bhd. are within the scope of IAS 41 / MFRS 141 Agriculture. (11 marks)
[Total: 25 marks]
TEV Bhd. Group (TEV Group) is engaged in manufacturing and selling precision components, tools and other related products. It is an export-oriented organisation. Most of TEV Group’s sales and receivables are denominated in the US Dollars. However, the sharp appreciation of the Malaysian Ringgit against the US Dollars in the past few months is expected to dent TEV Group’s financial performance. Therefore, TEV Group’s board of directors is concerned with the performance of TEV Group for the year ended 31 October 2024 as compared to the previous year.
TEV Group’s summarised financial statements for the year ended 31 October 2024 are shown below:
Consolidated statement of financial position as at 31 October 2024:
| RM’000 | |
| ASSETS | |
| Non-current assets | |
| Property, plant and equipment | 102,160 |
| Investments | 15,600 |
| 117,760 | ||
| Current assets | ||
| Inventories | 25,600 | |
| Trade receivables | 24,960 | |
| Cash and bank | 6,400 |
56,960
Total assets 174,720
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Ordinary shares | 52,800 | |
| Retained earnings | 48,000 |
| 100,800 | ||
| Non-current liabilities | ||
| Bank loans | 17,600 | |
| Current liabilities | ||
| Trade payables | 42,240 | |
| Tax payable | 14,080 |
56,320
Total equity and liabilities 174,720
Consolidated statement of profit or loss for the year ended 31 October 2024
| RM’000 | |
| Revenue | 293,000 |
| Cost of sales | (194,500) |
| Gross profit | 98,500 |
| Distribution costs | (25,300) |
| Administrative expenses | (57,950) |
| Finance costs | (1,280) |
| Profit before tax | 13,970 |
| Income tax expense | (3,353) |
| Profit for the year | 10,617 |
Additional information:
Return on capital employed : 18.77%
Asset turnover : 2.52 times
Gross profit margin : 36.89%
Operating profit margin : 7.45%
Current ratio : 1.50:1
Quick ratio : 1.03:1
Inventory turnover period : 30 days
Trade receivable collection period : 35 days
Interest cover : 12.80 times
Gearing ratio : 13.28%
Required:
Prepare a report to the board of directors of TEV Bhd. Group analysing its financial performance and financial position for the years ended 31 October 2024 and 31 October 2023.
[Total: 25 marks]
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