Homework answers / question archive / Nobita Bhd is involved in the manufacturing and marketing of furniture in Tanjung Malim, Perak

Nobita Bhd is involved in the manufacturing and marketing of furniture in Tanjung Malim, Perak

Accounting

Share With

Nobita Bhd is involved in the manufacturing and marketing of furniture in Tanjung Malim, Perak. Below is the trial balance of Nobita Bhd for the year ended 30 June 2020: Debit (RM'000) Credit (RM'000) 279.000 188,300 20,000 41.200 1,500 824 880 25,000 7,000 4,819 Revenue Cost of Sale Interim Dividend paid Administrative expenses Distribution expenses Finance Cost Income Tax payable Freehold land at valuation as at 1 July 2019(1) Building at cost as at 1 July 2019 Plant and machinery at cost as at 1 July 2019(1)&(1) Accumulated depreciation as at 1 July 2019 Building Plant and machinery Investment property at fair value as at 1 July 2019(iv) Development cost (v) Investment (vi) Ordinary share capital Retained earnings as at 1 July 2019 Asset revaluation reserve as at 1 July 2019 5% Debentures Trade receivables and payables Deferred tax Cash and bank Inventories (ix) Income taxes paid (x) Total 700 550 2,738 77,000 10,000 100,000 12,511 18.000 20,000 5,500 3,380 6.700 48,000 6,440 1,000 440,521 440,521 Additional information: The land is revalued every three years and the balance in the asset revaluation reserve is related to the previous years' revaluation. Current year revaluation showed a decrease of RM0.5 million in the value of the land and this has not been recorded. (ii) A new equipment costing RM780,000 was purchased on 1 July 2019 to replace the old machinery that was purchased on 1 July 2015 at a cost of RM420,000. The old equipment was disposed for RM200,000. None of these transactions have been recorded in the accounts at year end. Building, plant and machinery are depreciated over their useful life of 10 years. All depreciation charges are included in administrative expenses. The policy of
(1) the company is to depreciate all its assets using the straight line method, giving full year's depreciation in the year of purchase and none in the year of disposal (II) A plant that was purchased on 1 July 2014 at a cost of RM500,000 had a reduction in production capacity since September 2019. This had caused several breakdowns during the production process. The board of directors therefore decided to provide impairment on the plant as at year end. The fair value of the plant as at 30 June 2020 is RM150,000. If the plant is to be disposed, a dismantling cost of RM20,000 is required. The impairment charge has yet to be recorded in the accounts. Plant and machinery are depreciated over their useful life of 10 years. All depreciation and impairment charges are included in administrative expenses. (iv) The investment property is measured based on the fair value model. The fair value is estimated at RM2,900,000 as at 30 June 2020. ( On 30 June 2020, the accountant realised that the development cost of RM500,000 incurred in December 2019 had been expensed off as administrative expenses. He also noted that the development cost will derive future economic benefit to the company and met the criteria for capitalisation under MFRS 138 Intangible Assets. (vi) The investment held by company comprises of 2,000,000 ordinary shares in GoodGloves Bhd which is measured at fair value through profit or loss. The shares were acquired by the company during the year. As at 30 June 2020, the fair value of one unit of GoodGloves Bhd's ordinary shares was RM6.90. This value has yet to be reflected in Nobita Bhd's financial statements. (vii) To finance the acquisition of a new factory building, Nobita Bhd issued 3,000 convertible loan stocks on 30 June 2020. The loan stocks have a three year term, and are issued at par with a face value of RM1,000 each, giving a total proceeds of RM3,000,000. Interest is payable annually by June each year in arrears at a nominal annual interest rate of 6%. Each loan stock is convertible into 250 ordinary shares of RM1 each at any time up to maturity. When the loan stocks were issued, the prevailing market interest rate for similar debt without conversion option was 10%. The issuance of loan stocks has not been recorded in the book. Year 1 2 3 6% 0.9434 0.891 0.8396 10% 0.9091 0.8264 0.7513 (vii) The Company was under litigation when one of its employee sued the company due to serious injury at work. Hence, a contingent liability was recognised as at year end. However, on 3 July 2020, the case came to court and the judgment was in favour of the employee which required the company to pay RM500,000 for the damage.
(ix) A class of inventory of company has been valued at RM280,000 when the net realizable value was RM325,000. On 1 July 2020, the inventory was sold only at RM265,200 due to the recent product introduced by a competitor. The directors have estimated that the income tax charge for the year ended 30 June 2020 is RM1,033,000, excluding the deferred tax charge. The deferred tax provision as at 30 June 2020 is RM4,105,000. Required:- (a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020. Show all relevant workings. [24 marks]