The trial balance of Pau Sudi Bhd. (PSB) as at 31 December 2020 is listed as follows:
Plant and machinery at cost 400
Building at cost 600
Freehold land at cost 215
Accumulated depreciation 1 Jan 2020
Plant and machinery 100
Trade receivables and payables 305 255
Cash at Bank 685
Purchases and Sales 525 1,500
Rental 100 30
Investment Income 20
Inventory (1 Jan 2020) 70
Administrative expenses 300
Selling and distribution expenses 103
Provision for doubtful debts 15
Provision for warranty 5
Directors’ remunerations 15
Legal & Audit Fees 22
Ordinary shares of RM1 each 300
10% Preference shares of RM1 each 100
Other Components of Equity 65
Revaluation reserve 20
Retained profit 1 Jan 2020 200
10% debentures, repayable in 10 years 400
Interest 20 10
Interim dividends paid
- Ordinary shares 20
- Preference shares 5
Tax expenses paid 35
Suspense accounts 150
1) PSB is currently using MFRS as a basis in preparing their financial statement.
2) A physical inventory check reveals inventory at a cost of RM200,000. PSB’s senior management decided to reduce the closing inventory by 5% due to stock obsolesces.
3) Prepaid expenses: Directors’ Remunerations RM5,000, Selling and distribution expenses RM3,000.
Accrued expenses: Administration RM10,000, Delivery charges RM10,000, Audit fees RM3,000, Advertisement RM5,000 and Bonuses RM30,000.
4) Debenture interest for the second half-year has not been provided.
5) Provision for doubtful debts of 6% is to be made after writing off RM5,000 as bad debts. The management decided to provide 1% of total sales for the year as provision for warranty.
6) Depreciation charges on cost:
i. Building 5%, charged to administrative expenses.
ii. Plant and machinery 5%, charged to cost of sales.
7) On 1 December 2020, PSB bought investment in quoted shares for RM50,000 through cash. The purchased was not recorded yet. At year end, PSB’s management decided to revalue the freehold land to its current value, RM210,000. On the same date, the market value of the investment in quoted shares was RM65,000.
8) The tax expenses for the year were RM30,000. The amount shown in the trial balance is the amount paid for the current year.
9) At the end of the year the company issued 100,000 ordinary shares at RM1.50 per share. The proceeds were recorded in the suspense accounts.
10) PSB declared a final dividend of RM10,000 for the ordinary shareholders as well as the preference shareholders for the current year during their Annual General Meeting (AGM). The AGM was held on 1 December 2020.
11) On 31 December 2020, a machine was sold for RM35,000 for cash. The machine was bought on 1 January 2015 for RM40,000. The sale was not recorded.
12) A former staff is suing PSB for wrongful dismissal. The total damages sought is RM250,000. PSB’s legal advisor advised that PSB will lose the case and advised PSB to settle out of court for RM200,000.
a) Prepare PSB’s Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2020. Show all your workings through notes.
b) Prepare PSB’s Statement of Changes in Equity as at 31 December 2020.
c) Prepare PSB’s Statement of Financial Position as at 31 December 2020.
d) Prepare PSB’s Notes to the Accounts (only up to where information permit) as at 31 December 2020.
(Total: 75 Marks)
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