FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

TUTORIAL 3: MFRS116 PROPERTY, PLANT AND EQUIPMENT

QUESTION 1 (CT APR 2019)

On 1 January 2014, Ocean Bhd acquired a new aquarium for its tropical fish business. The
purchase price of the aquarium was RM55,000. The aquarium includes special air pump and
filter. The purchase price did not include delivery and handling cots of RM3,500. The
estimated useful life of the aquarium was 10 years.

Upon delivery the aquarium underwent rigorous tests to ensure that it was fit for the tropical
fishes. The testing costs incurred was RM4,500. The company also incurred repair and
maintenance costs of RM2,000 per annum.

On 1 January 2017, the aquarium experienced some problems. Upon inspection, it was
discovered that its special air pump was damaged and need to be replaced. The company
paid RM2,800 for the cost of the new air pump and this replacement will reduce the operating
cost of the aquarium. The cost of the old pump was RM2,000. There was no change in
remaining useful life of the aquarium.

On 31 December 2018, it was discovered that the tropical fishes suffered from a disease
which weaken their immune systems and they might not recover from it. Ocean Bhd
calculated that the aquarium fair value less cost to sell and its value in use was RM32,000
and RM31,000 respectively. The company financial year ends on 31 December every year.

Required:

a. Calculate the initial cost of the aquarium.

Answer:

Initial cost of the aquarium on 1 January 2014

Purchase price RM55,000
Delivery and handling cost 3,500
Testing cost 4,500
Initial cost RM63,000

b. Briefly explain the models in measuring property, plant and equipment in accordance
with MFRS 116 Property, plant and equipment
c. For the following:
i. Explain the possible treatment of the transaction in year 2017
ii. Show journal entries related to c(i) above
d. Calculate the impairment loss (if any) for year 2018.

B. Best Bhd acquired a machine for RM1,500,000 on 1 January 2015. The estimated useful
life of the machine was 10 years. Depreciation was calculated based on monthly basis.
Best Bhd adopted the revaluation model for its property, plant and equipment.

On 1 January 2017, the fair value of the machine was RM1,400,000. As at 1 January
2018, the useful life of the machine was reviewed and the company change the
remaining useful life to 5 years. On 1 April 2019, the machine was sold for RM1,425,000.

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 FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

Required:
Prepare a note to show the movement of the machine for the year ended 31 December
2017 and 31 December 2019.
Dr Cash 1425000
Schedule of movement of PPE for the year ended 31 Dec 2017 and 2019 Dr acc depr 481,250
Dr sopl 456,250
Cost/valuation Machine Cr machine 1.4 m
2017 2018 2019
1. Opening balance 1,500,000 1,400,000 1,400,000
5. Surplus (1,400,000-(1,500,000-
200,000 -
300,000)
4. Elimination of accumulated
(300,000) -
depreciation
Disposal cost (1,400,000)
2. Closing balance-fair value 1,400,000 1,400,000 0

Dr acc Accumulated depreciation

depr 3. Opening balance (1,500,000/10)*2
300,000 175,000 420,000
years
Cr 4. Elimination of accumulated
(300,000) -
machine depreciation
6. Charge for the year (1,400,000/(10- [(1,225,000/5)*3/12
(1,225,000/5)
2) 175,000 ]
245,000
61,250
9. Disposal accumulated depreciation (481,250)
7. Closing balance 175,000 420,000 0
8. Carrying amount (1.4 m- 175,000) 1,225,000 980,000 0

QUESTION 2 (CT Oct 2018)

A. The Super King Bhd acquired a tract of land at a purchase price of RM20 million and a
machine to produce an electrical product on 1 January 2017. The cost incurred on the
machine is as follows:

Manufacturer’s price RM3,000,000

Trade discount on manufacturer’s price 10%
Freight Charges RM80,000
Electrical installation RM50,000
Staff training to operate the machine RM60,000 -sopl
Five years maintenance contract services RM40,000 -sopl
The cost for dismantling and restoring the RM RM35,000
sites (present value RM22,000)

The cost of freight charges also included RM10,000 insurance on the machine and RM2,000
cost of rectification on the cable of the machine. Estimated residual value of the machine is
RM300,000. The useful life of the machine is 10 years and depreciation is calculated using
straight line method on monthly basis.

In acquiring the land, the company paid RM250,000 for the lawyer fees for the purpose of
purchase and need to demolished the old unused building on the land at a cost of RM200,000
with some of materials from the old building were sold for RM50,000.

On 1 July 2018, the worker accidently pushes the wrong machine button while operating the
machine. The machine broke down and requires some component to be replaced. The cost of

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 FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

new component was RM200,000 and the replacement can lower the cost of yearly
maintenance. The old component had a carrying amount of RM120,000 will be disposed at
zero scrap value. The cost model was applied and all the payment had been settled. After the
replacement, there is no changes in the useful life but the scrap value of machine will be nil.
Financial year end is 31 December each year.

Required:

i. Calculate the initial cost of the land and machine.

Answer:
Initial cost of land
Purchase price RM20,000,000
Lawyer fees 250,000
Demolishing cost 200,000
Sales of materials of old building (50,000)
Initial cost RM20,400,000

Initial cost of the machine

Purchase price RM3,000,000
Less: trade discount(10%x3m) (300,000)
Freight charges 80,000
Electrical installation 50,000
Present value of dismantling cost 22,000
Less: rectification cost (2,000)
Initial cost RM2,850,000

ii. Determine the expenses incurred for the year of 2017 for the Super King Bhd.
Answer:

Staff training RM60,000

Maintenance service (40,000/5) 8,000
Rectification cost 2,000
Depreciation expense on machine (2,850,000-300,000/10) 255,000

iii. According to MFRS116 Property, plant and equipment, subsequent expenditure can be
capitalised only if it enhances the value of the property, plant and equipment and increase
the future benefits from the existing asset beyond its originally assessed standard of
performance.

State TWO (2) examples of increase future benefits from the existing asset beyond its
originally assessed standard of performance.

iv. Record the journal entries for the replacement of the machine mentioned above.

B. The property, plant and equipment owned by Glory Bhd were as follows:

Property Date of Cost (RM) Depreciati Fair value Fair value

acquisition on 31 31
December December
2016 2017
(RM) (RM)
Land A 1 January 10,000,000 - 13,000,000 14,000,000
2013
Land B 1 January 11,000,000 - 13,000,000 -

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 FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

2014
Building 1 July 2014 4,000,000 10 years 3,300,000 4,000,000
on
monthly
basis

On 31 December 2015, there was a report stating that the building has a physical damage.
The fair value less cost to sell at that date was RM3,300,000 and present value of future cash
flows expected to be derived from the building was RM3,200,000.

 On 1 July 2017, land B was sold at selling price of RM15,000,000.

 It is the policy of the company to measure its property, plant and equipment using
revaluation model.

Required:

i. Explain accounting treatment for building for the year ended 31 December 2015.

ii. Prepare the journal entry related to land B for the year ended 31 December 2017.

iii. Prepare a note to show the movement of the property, plant and equipment for the year
ended 31 December 2017.

QUESTION 3 (CT APR 2018)

A. Aleumdaun Bhd is a company involves in importing goods from Korea and

repackaging the goods for local market. On 1 January 2013, the company purchased
a packaging, machine from China at the invoice price of RM250,000. The others cost
incurred including the transportation cost of RM2,500 and the shipment insurance of
RM12,000. Aleumdaun Bhd also incurred installation cost a of RM8,000. Upon
delivery, the packaging machine was then tested to ensure its efficiency. The testing
cost was RM10,000. Annual maintenance cost was expected to be RM15,000. Special
training was conducted for employees to operate the packaging machine amounted to
RM8,800. It was expected that the useful life of the packaging machine was 10 years.
The residual value was RM10,000.

On 1 January 2916, the production line experienced a disruption due to a breakfast on

the packaging machine. Upon inspection, the engineer discovered that a part of the
packaging machine costing RM30,000 was broken and needed to be replaced.
Carrying amount of the broken part was RM21,300. The company decided to replace
the broken part of the packaging machine with the new part costing RM40,000. This
replacement can increase the current production capacity. On the same date after the
replacement, Aleumdaun Bhd review its useful life and the remaining life of the
packaging machine as determined to be 5 years with no residual value.

The company applies cost model for its property, plant and equipment.

Required:
a. Calculate the initial cost of the packaging machine. Show all workings.
Answer:
Initial cost of the packaging machine
Invoice price RM250,000
transportation cost RM2,500

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 FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

the shipment insurance RM12,000

installation cost RM8,000
testing cost RM10,000
Total initial cost RM282,500
b. Show the journal entry upon recognition of initial cost.
Journal entry
1 Jan 2013
Dr PPE: Machine 282,500
Cr Cash/bank 282,500
c. For the following:
i. State two (2) example of subsequent costs.
ii. Explain the accounting treatment for the transactions that occurred on 1
January 2016.
iii. Calculate the depreciation of packaging machine for 2015 and 2016.

B. Power Bhd acquired a building for RM1,500,000 on 1 January 1205. The estimated
useful life of the building was 20 years. Depreciation was calculated based on monthly
basis. Power Bhd adopted the revaluation model for its property, plant and equipment.

On 1 January 2017, the fair value of the building was RM1,400,000. As at 1

September 2017, the building was sold at RM1,425,000.

Required
a. Prepare a note to show the movement of the building for the year ended 31
December 2017.
b. Calculate the amount of gain//loss for the disposal above.

QUESTION 4 (CT OCT 2019)

A. Define the following terms:

i. Carrying amount
ii. Depreciable amount
iii. Useful life

B. Legend Manufacturing Bhd is a leading manufacturer of sandwich biscuits, wafer rolls

and crackers in Malaysia. On 1 April 2019, the company bought a new machinery to be
used in its production process for its latest product which is oat cookies.

The purchase price of the machinery is RM6,500,000. The purchase price consists of 2
payments. The first payment of RM3,500,000 is paid immediately upon delivery. The
second payment of RM3,000,000 will be made on 1 July 2021, of which the present
value is RM2,850,000.

The following cost is related to the machinery:

RM
Consultancy fees for the acquisition of machinery 10,000
Consultancy fees to train existing workers on the procedure to handle the
14,000
new machinery
Import duties 350,000
Delivery and installation cost 77,000

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 FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

Site preparation 165,000

Testing of machinery 6,000
Annual maintenance of the machinery 20,000
Lubricants on the machinery yearly 6,000

The samples produced during the testing process were sold at RM2,000. At the end of
the useful life of the machinery, the company estimated that dismantling cost of
RM30,000 will be incurred. The present value of the future payment for the dismantling
costs is RM21,100. Other costs incurred on the acquisition of the above machinery
were paid immediately.

Required:

Calculate the initial cost of the machinery on 1 April 2019.

C. Ace Engineering Bhd is a growing engineering company situated in Alor Gajah, Melaka.
The company ends its accounting period on 30 September each year.

Among of the assets owned by the company are a land, a machinery, an office building
and two factory buildings. These assets were bought on 1 October 2009 except the
machinery which was bought on 1 April 2013.

Below is the information related to the assets:

Initial cost
Assets Location Depreciation method
(RM)
Land Machang, Kelantan 8,000,000 -
Factory
Segamat, Johor 15,000,000
building A Straight line method over 50
Factory years with no residual value,
Machang, Kelantan 18,000,000
building B monthly basis
Office building Alor Gajah, Melaka 300,000
Reducing balance method over
In factory building
Machinery 400,000 8 years with no residual value,
B
yearly basis

Additional information:

1. The fair values of the land on 30 September 2014 and 30 September 2019 are
RM7,100,000 and RM8,200,000 respectively.

2. At the end of the year 2018, there is a massive flood in Segamat. This flood has
negatively affected the production of factory building A. On 1 April 2019, the
company conducted an impairment test on the factory building. On that date, the
fair value less cost to sell is RM8,000,000 and the value in use is RM8,550,000.

3. On 1 October 2018, the fair value of factory building B is RM20,500,000.

4. In December 2018, during a meeting conducted by the company’s directors, they

decided to relocate the administration of the company to Machang, Kelantan.
Therefore, on 30 September 2019, the company sold the office building at
RM440,000.

5. The company incurs an annual service cost of RM5,800 for the machinery. On 30
September 2019, one broken component of the machinery is replaced with a
new component at a cost of RM108,000. After the replacement took place, the
remaining useful life of the machinery is revised to 5 years.

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 FAR320: FINANCIAL ACCOUNTING 5: MFRS116 Property, Plant and Equipment

6. It is the policy of Ace Engineering Bhd to adopt the revaluation model for its
property, plant and equipment and the company chooses to transfer some of the
surplus to retained profits as and when the property, plant and equipment is used
by the company.

Required:

i. Prepare the journal entries to record the revaluation of land on 30 September

2019.

ii. Calculate the impairment loss (if any) of factory building A on 1 April 2019.

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 FAR270 OCT 2020/AC120/PERLIS

iii. Prepare the journal entries to record all transactions related to factory building B
for the year ended 30 September 2019.

iv. Discuss the accounting treatment of the annual service cost and the
replacement cost which are related to the machinery for the year ended 30
September 2019.

v. Construct a note to the accounts to show the movement of the land, factory
building B and the office building for the year ended 30 September 2019.

QUESTION 1(FE JUNE 2019)

a. Perotiga Bhd is a company involved in automotive industry located in Southern

Malaysia since 1998. Perotiga Bhd plans to expand its business by having another
factory building in Northern Malaysia and the company has already identified Kuala
Nerang as the location for its latest branch. Besides factory building, the company
needs to have new office building to the business at Kuala Nerang. Perotiga Bhd
acquired the office building but the factory needs to be constructed because it requires
specific features.

Perotiga Bhd acquired the office building on 1 July 2018 and commenced the
construction of the factory building on 1 January 2018. The construction would be
completed, and it is ready to be used on 1 December 2018. The following are the costs
incurred to acquire the office building and to construct the factory building.

Items Office building Factory

building
RM RM
Purchase price 36,000,000 -
Legal fees 250,000 -
Consultancy fees paid to Smart Click Sdn Bhd 470,000 400,000
General administrative cost per year 360,000 500,000
Maintenance cost per year 200,000 8,000,000
Construction cost: -
Material cost - 9,000,000
Labour cost - 4,500,000
Contractor’s fees - 12,000,000
Installation and technical cost 900,000 2,500,000

Perotiga Bhd received 5% trade discount for the office building. The consultancy fees
paid to Smart Click Sdn Bhd consists of consultation to Perotiga Bhd for the acquisition
of the office building amounting to RM470,000 and consultation on the training of new
factory workers which amounted to RM400,000.

The material cost included the excessive wastage of material of RM800,000 whilst the
labour cost has already excluded the idle capacity of RM100,000.

The useful life of the office building and factory building is 50 years.

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 FAR270 OCT 2020/AC120/PERLIS

Required:

Identify the initial cost of the office building and the factory building in Kuala Nerang on
1 July 2018 and 1 December 2018, respectively.

Initial cost :

OFFICE BUILDING (I JULY 2018) RM

Purchase price 36,000,000
(-)5% Trade discount (1,800,000)
Legal fees 250,000
Consultancy fees 470,000
installation 900,000
Initial cost 35,820,000

FACTORY BUILDING (1 Dec 2018) RM

Material cost 9,000,000
(-) wastage of material (800,000)
Labour cost 4,500,000
Contractor’s fee 12,000,000
installation 2,500,000
Initial cost 27,200,000

b. Proten Bhd purchased a machinery costing RM500,000 on 1 Janaury 2014 and the
machinery is depreciated over 10 years. Proten Bhd spends RM10,000 per annum to
maintain the performance of the machinery.

On 1 January 2018, the machinery broke down. A detail inspection found out that one
component of the machinery is to be replaced. The carrying amount of the replaced
component was RM5,000. Proten Bhd incurred replacement cost of RM8,000 for the
new component. After the replacement took place, there was an increase in the output
capacity of the machinery.

Required:

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 FAR270 OCT 2020/AC120/PERLIS

i. Explain the accounting treatment for the cost of the new component and the
maintenance cost for the year ended 31 December 2018.

ii. Calculate the depreciation expense for the year ended 31 December 2018.

c. Suzuku Bhd is a manufacturing company in Negeri Sembilan which owns two land.
One land is situated in Senawang and the other land is situated in Seremban. Suzuku
Bhd purchased both lands in 1999. The information related to the two lands is as
follows:

Asset Initial cost on Fair value on Fair value on

1 July 1999 1 July 2009 1 January
2018
RM RM
Land in Senawang 6,000,000 5,800,000 6,100,000
Land in Seremban 7,000,000 9,500,000 9,350,000

Suzuku Bhd also owns a self-constructed plant. The initial cost of the plant was
RM22,000,000. Once the construction has completed. Suzuku Bhd started the
manufacturing activity in the plant on 1 January 2003. On 1 January 2018, the fair
value of the plant was RM23,905,000.

In early 2009, Suzuku Bhd decided to expand its business and constructed an
administrative building in Seremban. On 1 January 2010, the initial cost of the
administrative building where major parts of the building were managed. Hence,
Suzuka Bhd conducted an impairment test on 1 July 2018. The fair value less cost to
sell was Rm500,000 while in use was RM485,000.

Suzuku Bhd adopted the revaluation model for its property, plant and equipment and
depreciated over 50 years on monthly basis. The company closes its accounts on 31
December every year.

Required:

i. Prepare the journal entries to record transactions related to both lands on 1

January 2018.
ii. Calculate the balance of the following accounts as at 31 December 2018 based
on the information related to the plant above.
a. Plant
b. Accumulated depreciation account
iii. Discuss the accounting treatment of the administrative building on 1 July 2018.

d. Yamahu Bhd acquired a land, a building and an office equipment on 1 January 2016.
The information related to these non-current assets is as follows:

Particular Land Building Office

Equipment

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 FAR270 OCT 2020/AC120/PERLIS

Initial cost 1 January 4,500,000 8,250,000 50,000

2016(RM)
Useful life (years) Unlimited 50 5
Fair value on 1 January 4,300,000 8,544,000 35,000
2018(RM
Subsequent Revaluation Revaluation Cost
measurement model model model

Yamahu Bhd sold the office equipment on 31 December 2018 at RM33,000.

Required:
Construct a schedule to show the movement of land, building and office equipment
for the year ended 31 December 2018.

QUESTION 2(FE DEC 2018)

Champion Outdoor Centre Bhd, a company providing facilities of outdoor activity

enthusiasts, opened its first outlet in Gopeng, Perak in 2018. On 1 June 2018, the company
acquired outdoor equipment which comprised “flying fox” trails and canopy walkways. Below
are the payments made in the acquisition date for the outdoor equipment:

RM
Designing of flying fox trails and canopy walkways 5,000
Delivery costs 5,000
Installation and testing equipment 22,000
Purchase price of the outdoor equipment 95,000
Maintenance for the first 12 months 12,000
Staff training 3,000

In addition to the above payments, the company will incur cost for future restoration
obligation at the end of equipment’s service period, present value for future restoration is
RM10,000.

Required:

i. Identify the initial cost of the outdoor equipment

a. Initial cost :

PPE OUTDOOR EQUIPMENT RM

Designing flying fox and canopy walks 5,000
Delivery cost 5,000
Installation 22,000
Purchase price 95,000
Present value of future restoration 10,000
Total initial cost 137,000
ii. Journalise the transactions of the initial costs.

RM RM
DR PPE: outdoor equipment 137,000

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 FAR270 OCT 2020/AC120/PERLIS

CR Bank (137,000-10,000) 127,000

CR Provision of restoration 10,000

b. On 1 January 2017, Coolvest Bhd acquired a warehouse with an estimated useful life
of 20 years for RM1,000,000. At the end of financial yea, the fair value of the
warehouse was determined at RM1,100,000.

However, a fire broke out the warehouse in January 2018. The warehouse ‘s
recoverable amount was estimated at RM500,000.

The company adopts revaluation model for the property and its financial year ends on
31 December each year.

Required:
i. Compute any surplus or deficit on revaluation of the warehouse for the year
ended 31 December 2017
ii. Prepare the journal entries to record the impairment of the warehouse in
January 2018.

a. Bushmedic Bhd acquired a large freehold land in Kulim, Kedah for RM20,000,000 in
early 2010. Later, the company constructed a RM10,000,000 ISO-certified laboratories
on the property as part of the expansion plan. The laboratory in operation since 1
January 2015 and it will be used for 50 years.

As at 31 December 2017, the overall fair value of the land decreased by 10% from its
original costs due to slump in real property market in the area. However, there was no
change in fair value in respect of the laboratory.

A year later, the property market recovered and as a result, the fair values for both land
and laboratory were revalued at RM25,000,000 and RM11,000,000 respectively as at
31 December 20189.

The company adopts revaluation model for its property and its financial years end on
31 December every year.

Required:
i. Discuss the accounting treatment of the land for the year ended 31 December
2017 and 31 December 2018. Support your answer with calculation.
ii. Discuss the accounting treatment of the laboratory for the year ended 31
December 2017 and 31 December 2018. Support your answer with calculation.

b. Melati Bhd acquired a piece of equipment on 1 January 2015 at a cost of

RM5,000,000. On 1 January 2016, a major part of the equipment was replaced with a
new part due to technological change. The cost of the major part of the equipment was
at 10% of the original cost of the equipment. The company paid RM550,000 for the
new part of RM50,000 for its transportation and installation. The replacement
increased the original estimated useful life of the equipment from 10 years to 13 years.

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 FAR270 OCT 2020/AC120/PERLIS

The company’s financial year ends on 31 December every year.

Required:
Construct a schedule to show the movement of the equipment for the year ended 31
December 2018.

QUESTION 3(FE JUNE 2018)

a. Define the meaning of Property under MFRS 116 Property, Plant and Equipment.
Tangible items
Held for use in production or supply of goods and services or for administrative
purpose
Expected to be used for more than 1 year

b. Cekap Clearprint is a company providing various types of printing services. On 1

June 2016, a high-tech digital printing machine was acquired from Japan. The
purchase price was RM140,000. Below are the additional costs incurred in
conjunction to the acquisition of the machine:

RM
Delivery and handling cost 25,000
Import duties 6,750
Installation costs 23,925
Testing of machine 5,000
Training cost 8,000
Annual maintenance of the machine 12,000
Lubricants on the machine yearly 5,000

The machine was available for use starting 1 July 2016 whereby depreciation was
also charged from this date monthly. The expected useful life of the machine was 10
years with residual value of RM8,500.

Required:
i. Identify the initial cost of the machine on 1 June 2016.

A. I) Initial cost

RM
Purchase price 140,000
Delivery and handling 25,000
Import duties 6,750
Installation cost 23,925
Testing cost 5,000
Total initial cost 200,675

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 FAR270 OCT 2020/AC120/PERLIS

ii. Classify the items to be written off in Statement of Profit or loss(extract) for
the year ended 31 December 2016 and items to be recorded in Statement of
Financial Position(extract) as at 31 December 2016.

II) SOPL extract as at 31 Dec 2016

EXPENSES RM
Training cost 8,000
Annual maintenance 12,000
Lubricant on machine 5,000
Depreciation [ (200,675 – 8,500)/10yrs) x 9,609
6/12]

SOFP extract as at 31 Dec 2016

NCA RM
Printing machines 200,675
Less: Acc depreciation (9,609)
CA 191,066

b. Properties Maju Bhd acquired an abandoned building with the estimated useful life of
20 years for RM2,200,000 on 1 July 2013. The fair value of the building on 1 January
2015 was determined to be RM1,800,000 with its revised remaining useful life of 12
years. The building was eventually sold off at a price of RM1,700,000 on 31
December 2016. It is the policy of the company to adopt the revaluation model for its
building under MFRS 116 Property, Plant and Equipment. Depreciation was based
monthly basis. The company’s financial year ends on 31 December each year.

Required:

i. Compute any surplus or deficit on revaluation of the building.

ii. Compute the amount of gain or loss from disposal of the property on 3
December 2016.
c. Asyraf Bhd acquired an equipment at a cost of RM1,200,000 on 1 January 2015. The
expected economic life was 15 years. On 1 January 2017, a major part of the
equipment costing RM300,000 as obsolete and thus was replaced with a new part at a
cost of RM520,000. The replacement will improve the performance of the equipment.

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 FAR270 OCT 2020/AC120/PERLIS

Additionally, Asraf Bhd also owned a machine used for production of goods. On 1
January 2016, the fair value of the machine owned was RM6,400,000 with remaining
useful life of 8 years. An impairment test was then performed on 31 December 2017
when the fair value less cost to sell was RM4,100,000 whereas the value in use was
determined to be RM4,200,000.

The company financials year ends on 31 December each year.

Required:

i. Identify the accounting treatment of the equipment for the years ended 31
December 2016 and 31 December 2017.

ii. Determine the journal entries to record the depreciation charged for the machine
on 31 December 2016.
iii. Calculate the impairment loss of the machine on 3 December 2017.

d. Ukay Bhd purchased a piece of land and plant costing RM3,000,000 and
RM1,500,000 respectively on 1 January 2015. On 1 July 2017, the land was revalued
ro RM3,300,000.
On the other hand, the plant was revalued to RM1,105,000 and 31 December 2016.
However, the plant was eventually sold for RM1,220,000 on 31 December 2017.
The company applied the revaluation model in the subsequent measurement of its
property, plant and equipment. The estimated useful life of the plant was determined
to be 15 years.

Required:
Construct a schedule to show the movement of property, plant and equipment for the
year ended 31 December 2017.

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