Tutorial 4 Chapter 6 & 7

TUTORIAL 4
CHAPTER 6 & 7
PART A: MULTIPLE CHOICE QUESTIONS

1. The main objective of financial reporting is:
A. To provide a process of identifying, recording and communicating financial
information
B. To provide an assurance to users that the financial information is free from any
material misstatements
C. To provide information on financial position, financial performance and cash
flow of an entity for economic decision making and also considering stewardship
and financial forecasting
D. To provide an audit report to users
2. The followings are the regulatory and disclosure requirements of financial reporting for
Fifi Corporation Bhd, a property investment company listed on Main Market of Bursa
Malaysia EXCEPT for:
A. Security Commision
B. Bank Negara Malaysia
C. Main Market Listing Requirements
D. Companies Act 2016
3. The following items are disclosed voluntarily by companies EXCEPT:

A. Chairman’s statement.
B. Corporate information.
C. Notice of audit committee meeting.
D. Important events calendar and corporate activities.
4. Nunu Corporation Berhad are required to have statement on corporate governance in

their annual report dor 2018. What does the statement is about?
A. A notice of annual general meeting
B. A statement on following the proper principles and practices as outlined by
referred governance code
C. A statement disclose members in the board of directors and respective posts
D. None from the above
5. A company is considered as a legal entity. The followings are characteristics of a legal

entity EXCEPT for:
A. An entity which is separate from owners
B. It can sue or to be sued, acquire, own, hold, develop or dispose of property and enter
into transactions
C. Companies are required to account and report based on acquisition costs rather
than fair market value for most assets and liabilities
D. It is necessary to record the business's transactions separately, to distinguish
them from the owners' personal transactions
6. The followings are the contents of a Meri Cekap Berhad annual report EXCEPT for:
A. Auditor’s Engagement Letter
B. Chairman's report
C. CEO's report
D. Profile of Board of Directors
7. A financial Statement for Bibi Berhad includes the following EXCEPT for:
A. Statement of Financial Position
B. Auditor’s Report
C. Statement of Changes in Equity
D. Notes to the Financial Statements
8. Information about the accounting policies adopted in preparing the financial statements
are explained in the:
A. statement of changes in equity
B. notes to the financial statements
C. statement of cash flows
D. corporate governance statement
9. According to the Financial Reporting Standard 101 (FRS 101): Presentation of

Financial statement, a complete set of financial statements must consist of the following
EXCEPT:
A. statement of comprehensive income
B. statement of changes in equity
C. statement of financial position
D. statement of internal control
10. Meri is a public accountant for Fifi Berhad. His opinion given on the sufficiency of
financial records kept by the company in accordance to the stated act and compliance
with the approved accounting standards can be found in which of the following report
for his client?
A. Director’s report
B. Audit committee’s report
C. Chairman’s statement
D. Auditor’s report
11. Which of the following is NOT the purpose of financial statement analysis?
A. To evaluate the company’s non-financial measures effectiveness.
B. To evaluate the current performance of a company with an ideas toward
correcting problem areas.
C. To use the past performance of a company to predict how it will do in the
future.
D. To compare the performance of the company with other competitors within the
same industry.
12. The following are the main ways to analyze financial statements EXCEPT for:
A. Horizontal analysis
B. SWOT analysis
C. Vertical analysis
D. Ratio analysis
13. Return on total assets is a function of:
A. interest rates and pre-tax profits
B. the debt-equity ratio
C. the after-tax profit margin and the asset turnover ratio
D. sales and fixed assets
14. Which of the following ratios gives information on the amount of profits reinvested in
the firm over the years?
A. Sales/Total assets
B. Debt/Total assets
C. Debt/Equity
D. Retained earnings/Total assets
Use the following information for questions 15 to 17.
The Naqiu Sdn Bhd had sales of RM10 million; operating income of RM3 million; after tax
income of RM1 million; assets of RM8 million; owner’s equity of RM5 million; and a total
debt of RM3 million.
15. What is Naqiu's return on assets?

A. 37.5%
B. 12.5%
C. 30.0%
D. 25.0%
16. What is Naqiu's return on equity?

A. 37.5%
B. 10.0%
C. 20.0%
D. 60.0%
17. What is Naqiu's profit margin?

A. 10.0%
B. 20.0%
C. 30.0%
D. 33.0%
The following ratios were given for two similar business:
Sin Trading Tok Trading

Stock turnover 6 times 8 times
Current ratio 2 times 3 times
Gross profit margin 30% 40%
Net profit margin 15% 10%
18. Refer to the above. The following statements are true EXCEPT for:
A. The sales of Tok Trading is increasing much faster than that of Sin Trading
B. The financial condition of Sin Trading is much stronger than Tok Trading
C. Tok Trading has more ability to repay its current liabilities when they become
due
D. The gross profit margin of Tok Trading is 10 cents more than that of Sin Trading
to cover the operating and non-operating expenses for a particular accounting
period
19. Companies that consistently earn rates of return above the competitive floor in the
industry are considered to possess a:
A. dominant market share
B. niche market
C. competitive advantage
D. monopolistic advantage
20. A measure useful in evaluating efficiency in the management of inventories is the:

A. quick ratio
B. ratio of fixed assets to long-term liabilities
C. working capital ratio
D. number of days’ sales in inventory
PART B: STRUCTURED QUESTION

QUESTION 1
The following data are taken from the financial statements:
Current Preceding
Year Year
Sales RM3,600,000 RM4,000,0
Cost of goods sold 2,000,000 2,700,000
00
Average inventory 372,000 352,000
Inventory, end of year 372,000 347,000
(a) Determine for each year

(1) the inventory turnover, round answer to one decimal place.
(2) the number of days' sales in inventory.
Round intermediate calculations to two decimal places and the final answer to
whole number.
(b) Comment on the favorable and unfavorable trends revealed by the data.
123. The following information was taken from the financial statement of
Fox Resources for December 31 of the current fiscal year:
Common stock, $20 par value (no change during the year) $5,000,000
Preferred 10% stock, $40 par (no change during the year) 2,000,000
QUESTION 2
The following information was taken from the financial statement of Fox Resources
for December 31 of the current fiscal year:
Ordinary shares, RM20 par value (no change during the RM5,000,000
Preferred
year) 10% stock, RM40 par (no change during the 2,000,000
year)
The net income was RM600,000, and the declared dividends on the ordinary
shares were RM125,000 for the current year. The market price of the ordinary
shares is RM20 per share.
Required:
Calculate for the ordinary shares
(a) earnings per share
(b) the price-earnings ratio
(c) the dividends per share and the dividend yield
QUESTION 3
Income statement data for Atif Creative Sdn Bhd for the years ended 31 December 2019 and
2018, are as follows:
2019 2018
(RM) (RM)
Sales 117,000 150,000
Cost of goods sold 56,000 70,000
Gross profit 61,000 80,000
Selling expenses 36,000 37,500
Administrative expenses 12,500 10,000
Total operating expenses 48,500 47,500
Income before tax 12,500 32,500
Taxation 2,000 10,000
Net income after tax 10,500 22,500
REQUIRED:
(a) Prepare a comparative income statement with horizontal analysis, indicating the
increase (decrease) for 2019 when compared with 2018.
(b) What conclusion can be drawn from the above horizontal analysis?

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TUTORIAL 4

PART A: MULTIPLE CHOICE QUESTIONS

3. The following items are disclosed voluntarily by companies EXCEPT:

4. Nunu Corporation Berhad are required to have statement on corporate governance in

5. A company is considered as a legal entity. The followings are characteristics of a legal

9. According to the Financial Reporting Standard 101 (FRS 101): Presentation of

Use the following information for questions 15 to 17.

15. What is Naqiu's return on assets?

16. What is Naqiu's return on equity?

17. What is Naqiu's profit margin?

The following ratios were given for two similar business:

Sin Trading Tok Trading

20. A measure useful in evaluating efficiency in the management of inventories is the:

PART B: STRUCTURED QUESTION

The following data are taken from the financial statements:

(a) Determine for each year

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