3 On 4 April 2012 one of the components of the machinery was damaged and had to

3 on 4 april 2012 one of the components of the

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3. On 4 April 2012, one of the components of the machinery was damaged and had to be replaced at a cost RM74,000. The machinery has six years remaining useful life as at 1 January 2012. It is expected that the new component will increase the production capacity of the machinery and extend the remaining useful life by two years. The carrying value of the old component replaced was RM34,000. Required: i. Discuss the accounting treatment for each of the above transactions. (10 marks) ii. Prepare a Statement of Profit or Loss and other Comprehensive Income for the year ended 31 December 2012. (5 marks) (Total: 15 marks)
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Question 2 Lazar Bhd acquired a freehold building costing RM1 million on 1 January 2004. The building is fully rented out to various organisations, earning rental income of RM120,000 per annum. The estimated life of the building was 50 years. The freehold building qualifies as investment property under MFRS 140 Investment Properties . The fair value of the building was RM1,200,000 and RM1,600,000 as at 31 December 2005 and 31 December 2006 respectively. The company adopts the fair value model in its measurement of investment properties subsequent to initial recognition. Required: i. Give two (2) examples of a property which can be classified as an investment property. (2 marks) ii. Discuss the accounting treatment of the change in the fair value of the freehold building on 31 December 2005 and 2006 and show the journal entries (narrations not required) to record the transactions relating to freehold building for the year ended 31 December 2006. (5 marks) iii. What is the accounting treatment of the freehold building if it was used by the company starting from 1 January 2007? (3 marks) (Total: 10 marks) END OF QUESTIONS
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