Hartamas Bhd is a company involved in manufacturing, packaging, and selling of frozen food and beverage products for local and international market in Seri Kembangan. The finance department of the company is preparing the final process of financial statement for the year ended 31 December 2022. The  financial statements will be authorized for issue on 31 March 2023 to the shareholders.
The following balances were extracted from the book of account as at 31 December 2022:

The following additional information is available:

On an investigation, the account clerk revealed that the following errors were made and no d no adjustment were yet to be o be made.

i. Cash sales on 18 December 2021 amounting to RM100,000 were recorded as credit sales by mistake.

ii. A payment for credit purchase to a supplier totaling RM180,000 in May 2022 was mistakenly accounted as maintenance cost.

2. The building of the company was depreciated at 5% per annum on a period of ownership basis, whereas plant and equipment was depreciated at 10% per annum on a yearly basis. All the property, plant, and equipment are using straight line method. The company adopts the revaluation model for its building. Depreciation for the year should be d be treated as administrative cost.

3. Hartamas Bhd decided to do impairment test to one of its machines (say, Machine X) as there was a physical damage due to extensive use to meet the increase demand. On 1 January 2022, the carrying value of the machine A was RM6,400,000 (Cost RM16,000,000) with remaining useful life of 4 years. While, the fair value less cost to sell was RM as RM6,100,000 and the value-in-use was determined t d to be RM6,200,000.

4. As at 31 December 2022, one of the buildings (say, Building A) in Setia Alam, has been transferred to investment property since the whole building were rented out to a third party. Building A was purchased on 1 March 2018 for RM1,500,000. At the date of transfer the fair value of the building was RM1,300,000. The company adopted the fair value model for its investment property.

5. The Company’s biological assets consist of two thousand (2,000) 2-years old rabbits which were purchased on 1 January this year. The Company was in the early stage of breeding and maturing the rabbits and expected to sell them in 3 years-time. On 1 July 2022, the company bought an additional five hundred (500) 6-months old rabbits. General information about the fair value of the rabbit as well as costs to sell was as follows:

Cost to sell:
Auctioneer’s fee
Transportation cost

6. The company has amortised all intangible assets on a straight-line basis within 10 years of their useful lives and charged  per year basis in t n the statement of profit or loss. On 2 January 2022, the company had disposed one of its licenses (classified as an intangible asset) to Real Property Berhad for a RM8 million by cheque. The license was acquired on 1 January 2018 for RM10 million.

7. A group of customers is suing for RM2,000,000 in compensation for hospitalisation due to severe food poisoning caused by an expired frozen product purchased from an authorised distributor in December 2022. The company’s lawyer believes that the plaintiff has a 30% chance of losing the case as at 18 December 2022, because the product was expired at the time of delivery to the distributors.

8. On 1 April 2023, the board of directors of Hartamas Bhd declared a final dividend amounting to R o RM500,000 in 0 in respect of the financial year ended 31 December 2022.

9. The current tax expense for the year ended was estimated at RM24,000,000.

REQUIRED:

PART A (GROUP PROJECT 1)

a. Refer to additional information (1). Discuss the appropriate accounting treatment for the information found for year ended 31 December 2022. Prepare the relevant journal entries. (Show relevant workings, narration for the journal is not required).

b. Refer to additional information (3). Explain the appropriate accounting for impairment test conducted on Machine X on 31 October 2022. Prepare relevant journal. (Show relevant workings, narration for the j e journal is not required).

c. Refer to additional information (4). Prepare the relevant journal entries for the transfer of Building A from PPE to IP. (Show relevant workings, narration for the journal is not required).

d. Refer to additional information (5). Prepare the relevant journal entries for the subsequent measurement of the rabbits for the year ended 31 December 2022. (Show relevant workings, narration for the journal is not required).

e. Refer to additional information (6). Prepare relevant journal entries to record the disposal of the license. (Show relevant workings, narration for the journal is not required).

f. Refer to additional information (7). Discuss the appropriate accounting treatment for lawsuit for year ended 31 December 2022. Prepare the relevant journal entries. (Show relevant workings, narration for the journal is not required).

g. Refer to additional information (8). Explain the appropriate accounting treatment when the Company declares the or e ordinary dividend after the reporting period.

PART B T B (GROUP PROJECT 2)
Prepare the following financial statements in accordance with the requirements of the Companies Act es Act 2016 and MFRS101 Presentation of n of Financial Statements and other relevant
Malaysian Financial Reporting Standards:

a. Statement of Profit or Loss and other Comprehensive Income for the year ended 31
December 2022.

b. Statement of Changes in es in Equity for the year ended 31 d 31 December 2022.

c. Statement of Financial Position as a as at 31 December 2022

d. Notes to Property, Plant, and Equipment for the year ended 31 December 2022.

Answers on Above Questions on Financial Management

Answer 1: The appropriate accounting treatment for the information found for year ended 31 December 2022 is described as follows:

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