FAR560 FINANCIAL ACCOUNTING AND REPORTING 4

TEST 1

QUESTION 1

The following information is related to building of Kucthen Bhd.

Cost of building purchased at 1.1.2015 RM1,000,000

Depreciation method Straight line over 20 years
Revalued amount at 31.12.2015 RM1,200,000
Recoverable amount at 31.12.2016 RM800,000
Recoverable amount at 31.12.2018 RM1,500,000

The company adopts revaluation model to measures its building. Depreciation of the building is to be
calculated based on straight-line method and monthly basis over its estimated useful lives.

Required:

a. Calculate revaluation reserve (if any) as at 31 December 2015. Prepare related journal entries for
the year ended 31 December 2015.
b. Calculate impairment loss (if any) during the year ended 31 December 20016. Prepare related
journal entries for the year ended 31 December 2016.
c. Explain the condition of reversal of an impairment loss in accordance with MFRS 136 Impairment of
Assets.
d. Calculate reversal of impairment loss (if any) during the year ended 31 December 2018. Prepare
related journal entries for the year ended 31 December 2018
e. Prepare related journal entries for the year ended 31 December 2018.
(25 Marks)
Show relevant workings. Narrations for the journal entries not required.

1
QUESTION 2

AeroDynamic Bhd has identified an impairment loss of RM41 millions for one of its cash-generating units
(CGUs). The carrying amount of the CGU’s net assets was RM150 millions, whereas the unit’s
recoverable amount was RM109 millions.

The draft values of the net assets of the unit are as follows:
RM
Millions
Goodwill 13
Property 20
Machinery 49
Vehicles 35
Patents 14
Net monetary assets 19
150

Additional Information:

1. The property, which had a market value of RM35 millions.

2. The net monetary assets will be realized in full.

Required:

a. Explain how is the impairment loss allocated to the assets.

b. Present a table to show how the impairment loss will be allocated.
(15 Marks)

TOTAL: 40 Marks