CONFIDENTIAL ACIJUL 2017/ACC466 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE FINANCIAL AND MANAGEMENT ACCOUNTING COURSE CODE ACC466 EXAMINATION JULY 2017 TIME : 3HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of five (5) questions. 2 ‘Answer ALL questions in the Answer Booklet. Start each answer on a new page. 3 Do not bring any material into the examination room unless permission is given by the invigitator. 4 Please check to make sure that this examination pack consists of i) the Question Paper ii) an Answer Booklet ~ provided by the Faculty 5, Answer ALL questions in English DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 6 printed pages ‘© Hak Cipta Universiti Teknologl MARA CONFIDENTIALCONFIDENTIAL 2 ACIJUL 2017/ACC466 QUESTION 1 a. __ Explain briefly the application of going concern concept to a business. (2 marks) b. Mr Ram, the owner of Park Eve Sdn Bhd, runs a business selling computer hardware and software products. The company bought a stockpile of computer hardware and software products, a printer and kitchen appliances for business purposes, and settle its utilities bills. Classify the item purchased/paid into the following: i Assets ii, Expenses Explain the difference between assets and expenses. (6 marks) c. Explain three (3) limitations of a sole proprietorship business. (6 marks) d. The capital for the company is contributed through the issuance of shares. Discuss the three types of share classes that a company can offer to the shareholders. (6 marks) (Total: 20 marks) QUESTION 2 a. State two (2) differences between government grant and government loan. (4 marks) b. Discuss briefly three (3) factors that make short-term loan more favourable than long-term loan. (6 marks) ¢. _Syarikat Jamin Jaya Sdn Bhd’s debt ratio is 65% which indicates that the company has relied too much on debt/ borrowing to finance its assets and operation. Thus, En. Azlan the company’s financial consultant has suggested to the management of the company to start financing its operation using equity. However, the suggestion has been rejected and the company wants to continue relying on debt financing. Explain three (3) possible reasons for the decision of the company's management. (6 marks) d. Briefly discuss two (2) differences between operating lease and financial lease. (4 marks) (Total: 20 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 3 QUESTION 3 ACIJUL 2017/ACC466 ‘The following information was extracted from GAPI Consulting Sdn Bhd for the year ended 31 December 2016. Additional information: 1. Assume all revenues came from credit transactions. 2. The average accounts receivable for the year was RM245,000. 3. The average inventory for the year was RM127,500. Required: Revenues for the year _ ‘966,000 Cost of sales 338,100 Other revenues 24,000 ‘Administrative expenses 200,000 Selling and | |___ 97,000 Interest 40,000 Taxation _ 84,125 [ Non- current assets 1,700,000_| Current assets 420,000 Total assets 2,120,000) Total equity 1,452,375 (includes 1,200,000 ordinary shares at RM1 each and reserves) Total non-current liabili 400,000 Total current liabilities. 267,625 a. Calculate the following ratios for GAPI Consulting Sdn Bhd. i, ii ii, iv. v, vi Net Profit margin Return on assets Time interest earned Debt to equity ratio Receivables Collection Period Inventory turnover (© Hak Cipta Universiti Teknologi MARA (9 marks) CONFIDENTIALCONFIDENTIAL 4 ACIJUL 2017/ACC466 b. Comment on the performance of the company in terms of its leverage and efficiency with the following industry average ratios i. Net profit margin 35% ii, Return on assets 20% iii, Time interest earned 25 times iv. Debt to equity ratio 52% v. Receivables Collection Period 60 days vi. Inventory turnover 4 times (8 marks) If you are a potential investor and looking for a profitable company to invest, explain with reasons whether you choose GAPI Consulting Sdn Bhd or not. (3 marks) (Total: 20 marks) QUESTION 4 RasahJaya Bhd has been established since 1998 and produces various types of light bulbs. Two most demanded light bulbs are specially designed Candle and Capsule which are sold for RM90 and RM80 per unit respectively. For year 2017, 2,000 units of Candle and 3,000 units of Capsule are expected to be produced and sold. Direct material cost per unit of Candle and Capsule is RM20 and RM26 respectively. Direct labour rate per hour is RM4 per hour for both products. A unit of Candle needs 3 hours while a unit of Capsule needs 2.5 hours to be completed. Since the establishment of the company, overhead costs are allocated based on direct labour hour. However, after the introduction of activity based costing method, the company recently plan to allocate the overhead costs based on the activities that take place. Thus, the company has appointed a new management accountant who has accumulated with the following information relating to the overhead costs attached to each activity of producing Candle and Capsule. Activity Predetermined Cost driver __ Estimated cost driver overhead cost - (RM) ____| Candle _| Capsule hours | 2.5 hours Assembly 40,000 __| Direct labour hours _| per unit_| __per unit Purchasing —_30,000 | Number of orders [5,000 3,000 Order processing ‘50,000 Customer order 3,000 2,000 _| Machine set-ups ,000 Number of set-ups | 30 30 (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 5 ACIJUL 2017/ACC466 Required: a. Calculate the profit per unit for each types of light bulb if the company allocate the overhead using direct labour hour. (Round up the answer to two decimal places) (8 marks) b. Compute overhead cost for each unit of Candle and Capsule if the company applies Activity Based Costing (ABC). (Round up the answer to two decimal places) (7 marks) . Discuss two (2) reasons why activity based costing method is more favourable than traditional costing. (5 marks) (Total: 20 marks) QUESTION 5 Mr Adib Darwisy, the owner of AD Sdn Bhd has asked you to evaluate on the investment proposal of a new production machine for the new product line of the company. The cost of the machine is RM287,500 and is expected to have a useful life of five years with zero salvage value. The firm policy is to depreciate its assets using the straight line method, The firm expected that, with the use of the new machine, sales in the first three years will increase by RM150,000 and by RM250,000 for the remaining two years. The production and operating cost (excluding depreciation) will represent 40% of sales. The company is subject to a 25% tax rate and its cost of capital is 15%. The desired payback period is three years. Below is the present value interest factor table for 15% and 20%: Period (n) |||] + (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 6 ACIJUL 2017/ACC466 Required: a. Calculate the following if AD Sdn Bhd acquired the machine’ i Payback Period i, Net Present Value ji, Internal Rate of Retum (12 marks) b. Explain whether the firm should accept or reject the investment proposal. (4 marks) ©. Explain two (2) importance of capital investment appraisal decision (2 marks) d. List two (2) advantages of discounted cash flow techr (2 marks) (Total: 20 marks) END OF QUESTION PAPER (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL