Case Study FAR 360 20.06

FAR 360 Integrated Accounting Study Sept 2011 Lada & Saus Sdn. Bhd.
TABLE OF CONTENTS
Content
Pages 2 - 17
Case Study
Requirements
18 - 22
Introduction
Puan Hamidah binti Wahab started a business producing and selling special homemade Sarawak black pepper sauce in 2007 as a sole proprietor. Over time, its popularity and demand prompts her to set up a company, now serving demand from all over the state. On 1 January 2010, Lada & Saus Sdn Bhd ( LSSB) was
incorporated with Puan Hamidah and her daughter Cik Intan binti Hassan, a UiTM graduate as shareholders. Both of them are also appointed as directors of the company. Previously Puan Hamidah operate d from her house located in Kota Samarahan. Curently, LSSB is renting a small factory located nearby Kota Samarahans industrial area.
LSSB was incorporated with an authorised capital of 3 million shares, par value of RM1.00 each. Upon conversion of the business from sole proprietorship to company, the directors agreed to purchase the closing stock of raw material (60kg of pepper and 117kg of sugar), finished goods (3,900 bottles), and a machinery from the previous business at 2010 market price. The proceeds of this sale was used by Puan Hamidahs as part of her paid-up capital of RM200,000. Meanwhile, Cik Intan invested RM300,000 on 2 January 2010 as capital to start the company. LSSB also secured a start-up loan of RM500,000 from Malaysian Industrial Development Finance Berhad (MIDF) with an interest rate of 4% , payable monthly for 10 years. The loan was received on 1 February 2010 and was given a rest period of six months before they start paying the loan. The loan is used to finance the purchase of fixed assets and working capital. In addition, RM100,000 is reserved for the purpose of future expansion project in 2011.
Production Process
The following are the processes involved in producing the black pepper sauce. 1. Cleaning The main ingredient, black pepper is washed and dried.
2. Mixing Other ingredients such as spice, sugar and salt are added to the mixer and are grounded until they become paste.
3. Cooking The paste is mixed with water and cooked .
4. Cooling The ready sauces are cooled down to room temperature.
5. Packaging The sauces are then poured into bottles and labeled and packed into boxes.
The Budget of 2010

In order to have a realistic budget, Cik Intan prepared the 2010 budget based on actual figures of 2009 when the business was still operating as sole proprietor ship and is prepared on a quarterly basis. As at 31 Dec 2009, inventory of sauce, pepper and sugar exist. The sauce was valued at cost of RM2.50 per bottle while pepper and sugar were valued at cost of RM23 per kg and RM2 per kg respectively. The annual sales for 2009 was RM464,000. For the first quarter of 2010 (Q1), LSSB had forecasted a sales figure of 30% higher than the 2009 average quarterly sales. The sales for second quarter (Q2) of 2010 were budgeted to be a 35% increase from sales in Q1. For Q 3 and Q4, the sales increase would be 40% and 55% respectively from the previous quarters. The
fourth quarter sales of 2010 are expected to be maintained for the next two quarters of 2011.
One bottle of black pepper sells for RM5.80. 20% of the budgeted sales unit s of the next quarter is to be maintained as the closing stock of the finished goods.
The price of fresh black pepper is expected to be RM25.00 per kg. As a means to reduce cost associated with inventory and also to o vercome sudden surge in demand LSSB keeps 5% of next quarters production as closing inventories for its pepper supplies. The price of sugar is expected to increase to RM150 per 60 kg. For its sugar supplies, LSSB plans to keep about 10% of next quarters production requirements as its closing stock. LSSB employs two grades of labour. In the year 2009, the machine operators and general production worker are spends approximately 0.50 minutes and 0.85 minutes respectively to produce one bottle of black pepper sauce. The labour rates for both machine operators and general production workers are RM10.00 and RM8.00 respectively.
The expected cost of a bottle is RM0.30 and labeling cost amounts to RM0.05 per label.
Other information is expected to remain the same as the previous year.
ACTUAL ACTIVITIES FOR THE YEAR ENDED 31 DECEMBER 2010. Sales

The standard size bottle of LSSB black pepper sauce is 375 grams per bottle. In coping up with the increases in input cost, the selling prices of the product have been increased to RM6.00 per bottle.
Production
During the year, the actual amount of black pepper sauce produced is as budgeted. Production cost would remain the same unless otherwise stated.
Material inputs and direct expenses

Black pepper forms a major input to the production of sau ce in addition to sugar. Salt, starch, garlic, spices, food conditioner are also required but are considered as indirect materials. The cost of indirect materials incurred in 2010 was RM6,750.
The average price of black pepper is RM26.50 per kg. Sugar cost is RM155 per 60 kg sack. A batch of 100 bottles of black pepper sauce requires 5 kg of black pepper and 8 kg of sugar. Bottles are purchased at RM0.30 each and labeling cost amounts to RM 0.05 per label.
Staffing
LSSB operates on an 8 working hour duration per day. Total working days in a year are 310 days. A production manager employed was paid RM42,000 per annum. The production team comprising of machine operators and general production workers takes 0.50 minute and 0.85 minute respectively, to produce one bottle of black pepper sauce. The machine operators and general production workers are paid as budgeted. RM4,500 was incurred paying 3 cleaners working in the factory. The company contribute 11% EPF and 1.5% SOCSO for all its production team. The December 2010 EPF and SOCSO amounting RM789 and RM108 will be paid in January 2011.
Overheads
Of the total floor area of the factory building, one quarter () is occupied by the administrative department. This forms the basis of allocating common cost. The actual expenses incurred during the year 20 10 were as follows:-
1. Monthly rental of factory RM2,500. The company paid three months refundable deposit. 2. Building insurance amounting RM2,400 (paid for one year from 1 April 2010 until 31 March 2011). 3. Maintenance of machineries RM11,500. 4. Utilities amount to RM55,000. 5. Factory supplies costs RM5,200.
Operating Expenses
Cik Intan is appointed as the Managing Director of the company with a monthly salary of RM5,000. This excludes entertainment allowance of RM1,000 which she received every month. LSSB engaged an accounts executive (RM1,500 per month), two administrative cum general clerks (RM800 per month each) and a marketing executive (RM1,200 per month). The company also pay 11% EPF for all its staffs. Both of the directors received an annual fee of RM12,000 each. The company paid the December 2010 EPF of RM1,133 in January 2011.
EPF and SOCSO are calculated based on the total salary paid to the workers and staff.
In addition to the above expenses, the company also incurred the following expenses for the year ended 31 December 2010 : RM 1. Pre-operating expenses 2. Stationeries 3. Advertisement 4. Petrol (1/3 was spent for Proton Waja) 5. Repair and maintenance of motor vehicles (1/3 for Proton Waja) 6. Entertainment expenses 7. Donation 8. Miscellaneous 5,000 2,000 6,000 13,930 1,800 5,000 6,000 4,700
The pre-operating expenses consist of the followings: RM Company registration fees Secretarial fee Halal certification service charge (valid for two years) Logo design fee Manufacturing license (annually) Deposit for utilities 2,500 200 5,000 1,130 4,300 800
LSSB estimated audit and tax fees charges will be RM8,000 and RM3,000 respectively. All expenses are paid when they are incurred unless otherwise stated. As at 31 December 2010, the company have yet to receive 20% of the total sales. The outstanding amount due to suppliers was 10% of the total direct materials purchased. The company maintains a cash in hand balance of RM5,000 every month.
Property, Plant and Equipment Machineries

When Puan Hamidah started her business in 2007, she bought a mixing machine at a cost of RM200,000. Previously, the machine has a useful life of 10 years and was depreciated yearly on straight line basis. Upon conversion of the business from a sole proprietorship to a company, Puan Hamidah sold the machine to LSSB at a market value of RM150,000. The company decided to continue depreciating the machine based on its remaining useful life.
In order to increase the production, LSSB bou ght two new machines for cooking and packaging. The cooking machine was bought on 1 January 2010 for RM200,000. LSSB was charged installation cost of RM1,000 and transportation cost of RM500. Since this is a special machine, the company had to send the
production team for training before using the machine. The training cost was RM3,000. The cooking machine is estimated to have a salvage value of RM10,000.
The packaging machine was bought on 10 February 2010 for RM100,000 but can only be used on 1 March 2010. Both machines had an estimated useful life of 10 years. The machines are depreciated based on period of ownership.
Motor Vehicles
LSSB purchased a Proton Waja which was used by the Managing Director. The company also bought a van for transporting and distributing the black pepper sauce to its customers. The Proton Waja was purchased on 5 February 2010 while the van was purchased on 10 April 2010. Each vehicle cost RM85,000 and RM120,000 respectively. The company paid 10% of the cost price as deposit for each of the vehicles upon purchase. The company took up a hire purchase financing from Bank Usahawan for both vehicles at an interest rate of 3.5% with a repayment period of 5 years. The hire purchase instalment s are paid monthly starting 20 March 2010 for the Proton Waja and 25 May 2010 for the van. The motor vehicles are depreciated at 10% based on monthly basis.
Office Equipment
LSSB bought computers, printers and air-conditioners in January 2010. These assets were acquired in 5 January 2010 at the costs of RM9,000, R M2,000 and RM5,000, respectively. The office equipment is to be depreciated on straight line method based on yearly basis at the rate of 10%, with no salvage value at the end of its useful life.
Furniture and fittings

New furniture costing RM10,000 were purchased in January 2010. The company also spent RM50,000 for renovation of its office. The management decided to depreciate the furniture and fittings at 10% on cost based on yearly basis.
FUTURE EXPANSION PROGRAMS

During the board of directors meeting held in 2010, it wa s decided that the company is will diversify its product lines by introducing a new product in May 2011. In order to diversify, it is anticipated that the company will have to inv est in a new machine costing RM180,000 excluding custom duty, transportation and insurance cost of RM16,000, RM7,000 and RM9,000 respectively. The forecasted sales of the new product will be RM150,000 annually for the first four years, and RM190,000 annually for the remaining years. The company is aware that both products (i.e., the existing and the new product) are competitive in nature. Therefore, it is anticipated that the introduction of the new product will result in the reduction of sales in the existing product by RM4,000 annually in the first four years and by RM5,000 annually for the remaining years.
The new machine will require an additional RM22 ,000 inventory. The company is planning to spend a total amount of RM6,000 on training their workers in hand ling the new machine. The training is scheduled to be conducted in the beginning of the year 2011. In addition, It is expected that the annual overhe ad cost will be increased by RM18,000. The company is planning to buy the machine in January 2011. It will be depreciated using the straight -line method over its useful life of 10 years with RM1,000 salvage value.
RM112,000 of the retained earnings is expected to be available to finance the machine. It is expected that the dividend payment for 2011 will be 5% based on
the market price (RM2). The dividend growth rate is anticipated to be at 7% indefinitely. The remaining balance will be financed by long term loan from MIDF at a pre-tax cost of capital of 4%.
Auditing
To comply and ensure the Company Act 1965 requirements fulfilled the board members has appointed Osman & Co, Public Accountant, to carry out an audit for the financial year ended 31 st December 2010. Beside that LSSB as appointed Badron Corporate Services Sdn Bhd as the tax agent. The address of Osman & Co and Badron Corporate Services are as follows:i. Osman & Co., Public Accountant, No 88,Lorong 2 Diamond ,Tabuan Jaya 93050,Kuching.Telephone:082 -677456 and Fax:082-677457 ii. Badron Corporate Services, No 1, Lorong Matang 1,Jalan Petra Jaya, 93250 Kuching. Telepho ne 082-622 745 and Fax :082 -677777
On 1 June 2010, Osman & Co Public Accountant received an appointment letter from LSSB to become company auditor for the year ended 31 st December 2010. The partner of Osman & Co drafted an engagement letter and was sent to the board of director and acknowledged received and agreed with all the terms specified and described therein. The audit comprises the audit firms partner, supervisor and two auditors. An entrance meeting was held on 1 July 2010, during which both parties was briefed on matters pertaining LSSB operations and performances as at 30th June 2010 and the objectives of an audit and how audit should be carried out by the auditor.
The audit comprises the audit firms partner, super visor and two auditors. An entrance meeting was held on 1 July 2010, during which both parties was briefed on matters pertaining LSSB operations and performances as at 30 June 2010 and the objectives of an audit and how audit should be carried out by the a uditor. The auditor visits the office, plants and other parts of the company. On 28 February 2011, the audit team led by the manager and two (2) auditors was given a full set
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of financial statements of the company for the year ended 31 December 2010. Once again upon receiving the financial statements the audit team performed the second field work within two weeks and it was very time-pressured. This was evidenced by the fact that the audit team had to work until mid -night and over the weekends. Nonetheless, LSSBs staffs had been very supportive and
accommodative throughout the whole audit process.
Test on Control
While auditors of Osman & Co. led by Fazrin performing the test on controls to assess the effectiveness the companys internal control system, t he audit team found that the company did not effectively implement the inventory control procedures.
The following is a brief description of the procedures implemented by the company.
The production process involved five (5) steps which cover cleaning of black paper; mixing black paper with spice, sugar and salt: cooking the paste with water; cooling and packing of sauces. Major raw materials used are black paper, sugar, salt and spice.
Purchasing, storing and issuing of materials used for production is handled by Jasmin the storekeeper. He had no experience in the inventory management especially applying inventory management techniques such as how to purchase quality materials with the best price. Other areas of concern keeping lowest and highest inventory level at all time.
There are no proper documentations used on the ordering of materials and the storekeeper just place the order when he feels like ordering. All items (black paper, sugar, salt) were kept in one place at the corner of the kitchen. Mr Jasmin place order from any suppliers, which in his opinion that are offering best price.
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He accumulated all invoices and simple purchase orders at the end of month to the account department for preparing ledger account. Sallem , the Accounts Executive of LSSB prepare the necessary accounts reconciliation once in every two (2) months and never been verified by Cik Intan binti Hassan, board member who is responsible on the financial management.
On few occasions the delivery of black paper, the major amo unt of cost production were not properly checked and supervised by another senior staff caused shortage quantity delivered. Due to the shortage of staff in the Finance Department, irregular time of the preparation and closing accounts were experienced in addition that the accounts are maintained manually. Inventory taking was once carried out on 31 December 2010 in absent of an auditor . Other than the mentioned issues, the audit team considered the internal control within the company were implemented satisfactorily and assessed as moderate level of control risk.
Substantive Test
Due to the moderate control risk identified, the audit team decided to concentrate more on the analytical review with the objective to gather audit evidence. During the performance substantive testing on the balances and on the class of transaction of inventory, the audit team discovered the following unrecorded transactions and to propose further adjustments to the management. (a) Provision of Audit fees and tax fees for the year ended 31 December 2010 amounted to RM3,500.00 and RM2,500.00 respectively were not provided in the book of accounts. (b) After searching for unrecorded liabilities, a purchase invoice dated 24 December 2010 amounted to RM1,500.00 to UnMo Enterprise was not accounted for but it is included in physical stock -take. (c) Allowance for doubtful debt are to made at RM550.00
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(d) Credit sales on 21 November to KaKa Trading amounted to RM3,000.00 was not included in the financial statement. The physical units of the sales was deducted from the inventory at the year end. (e) Upon completing the audit assignment, the audit team has submitted the audit files to the tax department for computing the actual tax expenses of LSSB for the year assessment 2010. Having those figures ready, the audit team will make the necessary adjustments to final accounts.
Completing the Audit

As part of the auditing assignment, the audit team examining and scrutinising the minutes of meeting of the company, the audit team discovered the board and the management has proposed the company to acquire RM200,000.00 machine excluding other cost such as custom duty, transportation and insurance. The actual transaction will take place in January 2011.The overall cost of the acquisition will be financed through the issue o f share and hire purchase loan.
Finalising the Audit

On 30 April 2011, the audit work was completed and draft copy for deliberation of the audited financial statements of the company was produced. The audit team and Mr.Fazrin had the exit meeting with th e Board of Directors and assistant accountant of LSSB on the same day. During the meeting, the audit team informed the management about their findings and proposed corrections and adjustment that require company to account for. The board agreed with the fi nding and promised to improve the weaknesses in the internal control in the future. The board also agreed to incorporate the adjusting entries into the general ledgers and reflected in the financial statements.
On 30 May 2011, the financial statements were approved during the board of directors meeting after the entire current year audit issues were satisfactorily resolved. The following is the extracted minutes of meeting.
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LADA & SAUS SDN BHD Company No:12345-K (Incorporated in Malaysia) DIRECTORS RESOLUTION IN WRITING IN ACCORDANCE WITH ARTICLES OF ASSOCIATION OF THE COMPANY We, being all the directors of the Company for the time being hereby resolve the following:
1. APPROVAL OF DIRECTORS REPORT AND ACCOUNT THAT the Audited Accounts for the year ended 31 December 2010 and the Directors Report and Statement by Directors thereon(hereinafter collectively referred to as Financial Statement) be hereby approved and that the following directors be and are hereby authorized to sign the said Financial Statements for and on behalf of the Board: i. ii. HAMIDAH BINTI WAHAB INTAN BINTI HASSAN
Further RESOLVED THAT the Financial Statements be and are hereby approved for submission to members at the forthcoming ANNUAL GENERAL MEETING of the company.
2 STATUTORY DECLARATION. THAT INTAN BINTI HASSAN be and is hereby authorized to make the Statutory Declaration in respect of the above said Accounts pursuant to Section 169(16) of the Companies Act, 1965.
BOARD OF DIRECTORS HAMIDAH BINTI WAHAB Kuching, Sarawak 30 May 2011 INTAN BINTI HASSAN
LADA & SAUS SDN BHD Company No:12345-K (Incorporated in Malaysia) STATEMENT BY DIRECTORS
Pursuant to Section 169(15) of the Companies Act,1965 We, Hamidah Binti Wahab and Intan Binti Hassan, being the Directors of Lada & Saus Sdn Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statement set out on pages XXX. Are drawn up in accordance with the provision of the
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Companies act, 1965 and Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position as at 31 December 2010 and of the result and the cash flows of the company for the year then ended.
Signed on behalf the LSSB Hamidah Binti Wahab XXXXXXXXXXXXXX Intan Binti Hassan XXXXXXXXXXXX
STATUTORY DECLARATION
Pursuant to Section 169(16) of the Companies Act, 1965 I, Intan Binti Hassan, being the Director primarily responsible for the financial management of Lada & Saus Sdn Bhd, do solemnly and sincerely declare that the accompanying financial statements set out on pagesXXtoXXare in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the abovementioned Intan Binti Hassan at Kuching in the State of Sarawak on 20 April 2011 Before me, Ahmad Karrim Commissioner for oaths No 1234, 3 Floor Jalan Tun Tan of Jalan Airport 89890 Kuching
rd
Intan Binti Hassan XXXXXXXXXXXX
Taxation
Badron Corporate Services was reappointed by LSSB Sdn Bhd as the companys tax agent. Badron Corporate Services was also the tax agent before the conversion of the sole proprietorship business to a company. En Badron Bakri whom is the owner of Badron Corporate Services acts as the tax consultant and is assisted by his team of tax executive. The Director General of IRB is satisfied that
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the company and the directors are resident in Malaysia for tax purposes for the year of assessment 2010.
During the process of setting up the company, Encik Badron and Cik Intan had discussed on the terms and conditions pertaining to tax matters as laid out in the Income Tax Act 1967. During the meeting, Encik Badron highlighted that tax computation of the company will be constructed based on the audited accounts and additional schedules provided by the company. Encik Badron and his tax team will carry out the assignment in determi ning the actual tax payable within 2 weeks after receiving the audited financial statements. Upon finalizing the computation of actual tax payable, the company is required to fill in and submit the tax return (Form C) to the IRB within 7 months after the closing of the companys year end. In this case, the deadline will be on or before 31 July 2011. In addition, Encik Badron has highlighted to his client that prior to computing the actual tax of the company, LSSB Sdn Bhd should prepare the estimate of tax payable for a year of assessment using prescribed form (Form CP204) and furnish to the Director General of IRB not later than 30 days before the beginning of the basis period for that year of assessment. In this case, it should be submitted latest by 1 December. However, pursuant to S.107C - ITA 1967 and upon confirmation with the IRB, Encik Badron further noted that the company is not required to prepare an estimation of income tax payable for the year 2010 since LSSB Sdn Bhd is considered a newly formed company. Therefore, the company is spared from preparing the estimated income tax payable for the year of assessment 2010 and 2011. Upon conversion of the business from a sole proprietorship to a company on 1 January 2010, the machine was sold to LSSB Sdn Bhd at market value of RM150,000. Encik Badron and his team informed that the disposal of the existing mixing machine to the company was not at arms length. Therefore, the company is deemed to have acquired the mixing machine at market value or net realizable value whichever is agreed upon. In this case, it has been agreed between the
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Director General of IRB and the owner that market value should be used. Encik Badron further noted that the company is still entitled to claim initial allowance on the mixing machine although it was a second hand machine on the ground that sole proprietorship and company are two different engagement.
The tax team started their assignment in determining the actual tax payable for LSSB Sdn Bhd on 10 June 2011. The tax team found that an amount of RM3,500 on leave passage of Cik Intan to Phuket, Thailand in 2010 was included as part of the entertainment expenses. The cost of air fare was RM1,500 while the remaining balance was for hotel and food. In addition, included in the salaries and allowances was a total salary of RM9,600 paid to a physically disabled employee (admin clerk) in 2010. Other than that, included in the miscellaneous expenses was the cost of wheel chair for the disabled employee amounting to RM2,500 purchased in June 2010. Upon further clarification, donation comprised of RM1,200 donation in kind given to an approved institution, while the remaining amount was cash given to unapproved institution.
Since the company is planning to diversify its business in 2011, Cik Intan has inquired the tax team regarding the possibility of constructing the companys own factory building in Kota Samarahans industrial area instead of renting out. The following cost are considered : co st of land (RM350,000), clearing of land (RM13,000), architects fee (RM20,000), construction cost (RM356,000) and electrical wiring and fitting (RM25,000). It is estimated that 58,000 square feet out of 490,000 square feet of the building will be used as the companys office. The factory building is expected to be completed in October 2011. Being satisfied with the provided information on taxation matters, the tax agent proceeded with the final computation of the tax liability followed by the filling of Form C. Badron Corporate Services signed the form on 1 0 July 2011 and the form was later declared as being true by Cik Intan.
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ANSWER THE FOLLOWING REQUIREMENTS
Execute the following instructions for the year ended 31 Decembe r 2010.
A. Management Accounting
1. Prepare the following budget for the year 2010.
a. Sales budget b. Production budget c. Material usage and purchase budget for black pepper and sugar. d. Direct labour cost budget e. Direct expense budget f. Fixed and variable overhead budget g. The standard cost card showing the total production cost
2. i. From the year 2010 Budget, the following information were available:
RM Budgeted fixed cost (all inclusive) for 2010 Variable cost per bottle of black pepper Selling price per bottle 150,000 3.00 5.80
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a. Calculate the break-even point (BEP) in units and RM, for the company for year 2010. b. Determine the margin of safety (in units) for the year.
ii. Suppose, in 2010, the company introduces another product, White pepper sauce as a new product together with Black pepper sauce. Determine the new BEP (for the company and each product) , based on the following information. Discuss the effect on the companys BEP for the year as
calculated in (i)(a) above.
Black pepper Projected Sales volume Variable cost per bottle Selling price per bottle Budgeted fixed cost (all inclusive) for 2010 550,000 RM3.00 RM5.80
White pepper 450,000 RM4.00 RM6.00
RM 150,000
B. Financial Accounting
Prepare the following financial statement for the year ended 31 December 2010.
1. Manufacturing Account 2. Statement of Comprehensive Income 3. Statement of Changes in Equity 4. Statement of Financial Position 5. Statement of Cash Flow (direct method)
Note: Show all relevant workings.
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C. Financial Management
1. The Industry averages obtained showed the following:
Current ratio Acid test ratio Inventory turnover Average collection period Total asset turnover Debt ratio Time interest earned Gross profit margin Net profit margin Return on Asset Return on Equity
2.34x 1.78x 7.23x 80 days 2.23x 48% 16x 28.60% 15.47% 12.88% 24.30%
Based on the 31 December 2010 unaudited figures, compute the above financial ratios for LSSB Sdn Bhd. Comment on the financial performance of LSSB Sdn Bhd in comparison with the industry average. For the purpose of calculating the financial ratios, use 360 days in year wherever applicable.
2. Based on the information given on the planned acquisition of the new machine, calculate the followings:
a. Initial outlay b. Annual differential cash flows c. Terminal cash flows of the proposed investment d. WACC e. Payback period f. Net present value
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3. As the bank officer, would you approve the c ompanys application for a loan ? Give reasons for your answer.
4. What is the advantage of raising funds through a combination of sources of financing instead of using just one source of financing?
D. Auditing
1. Identify the weakness in the present inventory purchasing, receiving and issuing control procedure and describe the poten tial irregularities, which could occur due to the weakness mentioned.
2. Suggest any improvements in system of internal control, which could prevent any potential irregularities.
3. Describe the regulatory provisions which cover the appointment and dismissal of company auditor. Quote the specific sections of the acts.
4. The audit findings are to be considered as material and to be incorporated in the audited financial statement as Client Adjusting Entries (CAJE). Discuss on the importance of preparing the audit working paper. Prepare a working statement of financial position and comprehensive income statement incorporating the adjustments into management financial statements.
5. Describe the essential content of a Letter of Representation. Prepare a Letter of Representation from Osman & Co.,Public Accountant at the end of the 2010 audit engagement.
6. Explain why analytical review is important and be part of the audit process.
7. Prepare the Audited Financial Statements of Lada & Saus Sdn. Bhd for the year ended 31 December 2010 in accordance with the applicable approved
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accounting standards in Malaysia and the provisions of the Companies Act. 1965 together with Directors Report, Statement by Directors, Statutory Declaration and Audit Report.
E. Taxation
1. Compute the followings: a) Capital allowances for the year of assessment 2010. b) Actual tax payable for the year of assessment 2010.
2. Complete the Form C for the year of assessment 2010.
3. Distinguish the difference between a sole proprietorship business and a company from the context of taxation? Your answer should include the following scope: a) Tax rate b) Forms for estimation c) Return form and d) Date of submission for each form (item in b and c)
4. Compute Cik Intans chargeable income for the year of assessment 2010.
5. If the factory building is to be constructed in the year of assessment 2011, advise the management on the claim of industrial building allowances. Your advice should include the computation of IBA, necess ary explanation in deriving the IBA and the manner of set off (i.e., IBA be deducted from which level of income?).
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FAR 360 Integrated Accounting Study Sept 2011 Lada & Saus Sdn. Bhd.

3. Cooking The paste is mixed with water and cooked .

4. Cooling The ready sauces are cooled down to room temperature.

The Budget of 2010

Other information is expected to remain the same as the previous year.

ACTUAL ACTIVITIES FOR THE YEAR ENDED 31 DECEMBER 2010. Sales

Material inputs and direct expenses

Property, Plant and Equipment Machineries

Furniture and fittings

FUTURE EXPANSION PROGRAMS

accommodative throughout the whole audit process.

The following is a brief description of the procedures implemented by the company.

Completing the Audit

Finalising the Audit

Intan Binti Hassan XXXXXXXXXXXX

ANSWER THE FOLLOWING REQUIREMENTS

1. Prepare the following budget for the year 2010.

calculated in (i)(a) above.

White pepper 450,000 RM4.00 RM6.00

Note: Show all relevant workings.

1. The Industry averages obtained showed the following:

2. Complete the Form C for the year of assessment 2010.

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