EXERCISE TOPIC 4 PROPERTY, PLANT AND EQUIPMENT (A191)

QUESTION 1

The list below shows the expenditure related to land, land improvement and buildings
acquired by Paduan Bhd.

1 Money borrowed to pay building contractor (signed a note) RM 560,000

2 Payment for construction from note proceeds 560,000

3 Cost of land fill and clearing 50,000

4 Premium on 6-month insurance policy during construction 60,000

5 Refund of 1-month insurance premium because construction 10,000

completed early

6 Architect’s fee on building 48,000

7 Cost of real estate purchased as a plant site (land RM250,000 315,000

and building RM65,000)

8 Installation of fences around property 60,000

9 Cost of razing and removing old building 40,000

10 Proceeds from residual value of demolished building 30,000

11 Interest paid during construction on money borrowed for 20,000

construction

12 Cost of parking lots and driveways 28,000

13 Excavation costs for new building 10,000

Required:
Identify each item by number and list the items in columnar form using the headings shown
below

Item Land Land Buildings Other accounts

improvement

1 RM560,000
(Note payable)

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QUESTION 2

Amalia Bhd is a construction company incorporated in 2016. During 2019, the following
transactions occurred.

February 2019 A piece of land is acquired with a building for RM560, 000. The closing
statement indicated that the land value was RM400, 000 and the building
value was RM160, 000. Shortly after the acquisition, the building was
demolished at a cost of RM43, 000. A new building was constructed and the
expenditures were as follows:

RM

Proceed from the sale of old building 56,000

Cost of land clearing 37,500

Excavation fees 52,100

Architectural design fees 77,900

Building permit fees 4,600

Cost of construction 430,400

Temporary house for workers 25,000

Parking lots, streets and side walks 36,700

Fences around the building 50,000

General expenses 209,000

General expenses included CEO salary amounting to RM150,000, 6-month

superintendent salary guarding the construction site totaling RM25,000 and
advertising expenses related to shop lots in the building of RM34,000.

April 2019 Acquired a specialized machine and an equipment at the price of RM80, 000.
The market value of the machine and the equipment is RM78, 750 and RM11,
250. To acquire these assets, Amalia Bhd issued 34,000 ordinary shares. The
market price of the shares is RM2.50 per share. Other costs paid related to
the machine were as follows.

Installation cost RM 18,000

Safety inspection cost prior to use 9,000

2
 Employee training cost for the machine 12,000

REQUIRED:

(a) Determine the cost of

(i) Land
(ii) Building
(iii) Land improvement (if any)

(b) Calculate the cost of specialized machine and equipment purchased in April 2019 and
prepare the journal entries.