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10 jan 2018 q2 yangyang bhd had purchased a unit of

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10.JAN 2018 – Q2Yangyang Bhd had purchased a unit of specialised heavy equipment from Pan EngineeringBhd to be used in producing the company’s product, BLITZ, on 1 January 2015.Details of costs incurred are as follows:RMPurchase price 600,000 Excise duty 15,000 Engineer’s fees 12,000Steel reinforcement costs 6,000 Maintenance and service contract forone (1) year 5,000 Shipping and transport costs 5,000Pre-production testing (necessary tobring the equipment to its workingcondition)5,000
Yangyang Bhd received a trade discount of 10% on the purchase price. The specialisedheavy equipment has an estimated useful life of five years with 10% residual value (fromcost) and to be depreciated on straight-line method based on monthly basis.The fair value of the specialised heavy equipment is RM400,000 on 1 January 2017. Theboard of directors plans to incorporate this value in the statement of financial position andcredited the surplus or deficit to the statement of profit or loss and other comprehensiveincome. The residual value will be eliminated as the revalued amount reflects the currentmarket condition of the specialised heavy equipment.Due to the requirement of the industry, the specialised heavy equipment has to undergo amajor inspection for every three (3) years which will start in 2018. The company closes itsbook on 31 December each year.Required:a. i. Briefly explain the recognition criteria of the specialised heavy equipment as an asset.(2 marks)ii.Describe the criteria of property, plant and equipment met by the specialised heavyequipment in accordance to MFRS 116,Property, Plant and Equipment.(3 marks)b. Regular inspection is identified as subsequent cost on property, plant and equipment.Briefly explain the accounting treatment of the major inspections cost on the specialisedheavy equipment. (4 marks)c. Residual value is one of the determinants in computing deprecation charge.Briefly explainthe term ‘residual value’. (3 marks)d. i. Briefly explain the initial cost of the purchased specialised heavy equipment. (2 marks)18FAR210/OCT 2021 – FEB 2022ii. Calculate the initial cost of the purchased specialised heavy equipment. (4 marks)iii. Calculate the accumulated depreciation expense for the specialised heavyequipment as at 31 December 2016. (2 marks)e. i. Discuss the reasons why a company revalue its property, plant and equipment. (5 marks)ii. Advise Yangyang Bhd on the accounting treatment of the revaluation of itsspecialised heavy equipment (occurred on 1 January 2017). Support your answer withcalculation. (5 marks) (Total: 30 marks)11.JUNE 2018 – Q2Cosmo Bhd is a brick manufacturer that closes its books on 31 December each year. Thecompany has ten years of experience in manufacturing range of bricks. Due to increasingdemand from customers, Cosmo Bhd acquired a showroom in Selayang on 1 April 2017.The showroom is convenient for potential customers to view the company’s range of bricks,which leads to potential placement of orders for Cosmo’s bricks.The showroom was acquired at a price of RM240,000 and they had to pay RM7,500 for legalfees and RM2,500 stamp duty on their Sales & Purchase (S&P) agreement. Cosmo expectsto market its bricks from the showroom for about 20 years.
Thisshowroomhassignificantcomponentswhichare:electricalsystemandroofrepresenting 15% and 30% respectively of the initial cost of the showroom. These twocomponents also are expected to have an estimated useful life of 5 years and 10 yearsrespectively. Cosmo Bhd depreciates the showroom and its components using straight linemethod on monthly basis.Required:a. i. Describe the term ‘asset’ in accordance with theConceptual Framework for FinancialReporting in Malaysia.(3 marks)ii. Explain briefly whether the showroom in Selayang can be classified as property,plant and equipment in accordance with MFRS 116Property, Plant and Equipment.(4marks)

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Term
Fall
Professor
N/A
Tags
Depreciation, International Financial Reporting Standards, Plant and Equipment

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