Suggested solution students’ copy

FAR270 CT NOV 22

QUESTION 1

A (i) Identify the cost to be capitalized and expense off.

1. Capitalised
2. Capitalised
3. Expense Off
4. Expense Off
5. Capitalised
(5 marks)

A (ii) Initial cost of Truck (Cahaya Bhd)

RM
Purchase price less discount (250,000 – 5,000) 245,000
Delivery and transportation 7,500
Road tax and insurance 4,800
Cost of painting company’s logo 3,000
Initial cost 260,300
(5 marks)

B (i) Compute the carrying amount of the mixing machine as at 30 June 2022
Ababil Bhd
Cost/ Valuation RM
As at 1 July 2021 270,000
Less: Accumulated Depreciation
270,000-20,000 X 2 years (100,000)
5 years
Carrying amount as at 1 July 2021 170,000
Add: Special component (1 Feb 2022) 80,000
Balance as at 30 June 2022 250,000
Less: Depreciation charge for the year
Charged for the year
250,000 – 20,000 (76,667)
(5 – 2) years
Carrying amount as at 30 June 2022 173,333
(4 marks)

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B (ii) Journal entries

1 Feb 2022 Dr Machinery 80,000

Cr Bank 80,000

30 June 2022 Dr SOPL - Depreciation 76,667

Cr Accumulated depreciation 76,667
(4 marks)

C i) Surplus or deficit on revaluation of building

Alfeel Bhd
RM
Cost 70,000,000
Less: Accumulated Depreciation (18,800,000)
Carrying amount as at 30 June 2021 51,200,000
55,000,000

3,800,000
(2 marks)

ii) Carrying amount of building

RM
Fair Value at 1 July 2021 55,000,000
Less: Accumulated depreciation 55,000,000 (2,115,385)
/26 years
Carrying amount as at 30 June 2022 52,884,615

(4 marks)

iii) Journal entries

1 July 2021 Dr SOPL - Deficit 300,000
Cr Land 300,000

Dr Building 3,800,000
Cr ARR- Building 3,800,000

Dr Accumulated depreciation 18,800,000

Cr Building 18,800,000

30 June 2022 Dr Land 1,300,000

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 Cr SOPL - Surplus 300,000
Cr ARR - Surplus 1,000,000

Dr SOPL (Depr) – building 2,115,385

Cr Accumulated depreciation 2,115,385

Dr Accumulated depreciation 2,115,385

Cr Building 2,115,385

Dr ARR - Building 884,615

Cr Building 884,615
(6 marks)

D. Kirana quest Bhd

2020 RM 2021 RM

At cost/valuation
Beginning balance as at 1 Jan 10,200,000 13,800,000
Add: Surplus on revaluation** 4,416,000
Less: Elimination of AD (816,000)
Balance as at 31 December 13,800,000 13,800,000

Accumulated Depreciation
Beginning balance as at 1 Jan 816,000 600,000
Charge for the year 600,000 600,000
(13,800,000/23years)
Less: Elimination of AD (816,000)
Balance as at 31 December 600,000 1,200,000

Accumulated Impairment loss

Beginning balance as at 1 Jan - -
Charge for the year *** - 3,100,000
Balance as at 31 December - 3,100,000
CA 13,200,000 9,500,000

Revaluation surplus**
CA = 10,200,000 – 816,000
= RM9,384,000

Surplus= 13,800,000 – 9,384,000

= RM4,416,000

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 Impairment***
FVLCTS = 9,000,000
Value in use = 9,500,000

Recoverable amount = the higher between FVLCTS and Value in use

= RM9,500,000

CA = 13,800,000 – 1,200,000
= RM12,600,000

Impairment loss = 12,600,000 – 9,500,000

= RM3,100,000

( 5 marks)

QUESTION 2

A.
i. An owned investment property shall be recognised as an asset when and only when:
a. It is probable that the future economic benefits that are associated with the
investment property will flow to the entity;
b. The cost of the investment property can be measure reliably.
(2 marks)
ii.
Floor 1- Floor rented out to tenant should be classified as an investment property
based on MFRS 140 since it is held to earn rentals.

Floor 2 - Floor occupied by Anas Bhd will be classified as Property,plant and

Equipment based on MFRS 116 since it is used by the company (owner-occupied).

Floor3 - Vacant floor and unoccupied should also be classified as an investment

property based on MFRS 140 since it is held for undetermined future use.

(3 marks)

B.
i. On 1/6/2020, the whole building shall be classified as an investment property
under MFRS140 because the number of floor for rented out is more significant
(14/15) compared to the owner occupied (1/15). The building also cannot be sold
separately. The asset is initially measured at its cost of RM18,700,000. (17m +
0.6m+1.1m)

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 On 31/12/2020, the difference of RM400,000 (18.7m-18.3m) is recognised as a
fair value loss in the SOPL. The Investment property should be recognised at its
fair value of RM18,300,000 as at 31/12/2020 in the SOFP.

On 31/12/2021, the difference of RM1,700,000 (20m-18.3m) is recognised as a

fair value gain in the SOPL. The Investment property should be recognised at its
fair value of RM20,000,000 as at 31/12/2021 in the SOFP.
(5 marks)

ii.

PSV Bhd
Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 December (extract)

2020 2021

Other expenses
FV loss on investment property (400,000 )
Other income
FV gain on investment property 1,700,000

PSV Bhd
Statement of Financial Position as at 31 December (extract)

Non-current assets 2020 2021

Investment property RM18,300,000 RM20,000,000

(5 marks)

END OF SUGGESTED SOLUTION

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