BKAR 2023 A182

REVISION TOPIC 1-PPE, 2- INVENTORIES & 3- INTANGIBLE ASSETS

QUESTION 1
Yayasan Bhd is a established construction company based at Alor Setar. Yayasan Bhd
financial year end is 31 December each year. Yayasan Bhd began construction work at
Taman Budaya to build a shopping complex that will be sold upon completion. The
constructions started on 2nd January 2012 and completed on 30 June 2013. The following
information is the expenditure incurred for the construction work:
Date RM
15 January 2012 1,400,000
31 May 2012 600,000
30 September 2012 400,000
25 January 2013 1,200,000
31 March 2013 800,000

On the same day of the construction work begin, Yayasan Bhd obtained RM1.5million
construction loan with 6% interest rate from Utara Bank Berhad and this is the specific loan
for the construction project. Yayasan Bhd also has two other general loans were outstanding
during the entire construction period; long-term notes payable of RM3 million with 7%
interest and term loan of RM4 million with 10% interest respectively.
REQUIRED:
(a) Compute interest capitalisation for the year 2012 and 2013. Provide justification for
the interest rate computed. Show all the workings. The interest rate to round up to
TWO (2) decimal points. All your answers to round up to the nearest RM.

(12 Marks)
(b) Prepare journal entries to record interest capitalisation for year 2012 and 2013

(4 Marks)
QUESTION 2
On 1 January 2015, Waja Berhad began construction a new building for its own use and
ended on 30 November 2015. The expenditures for construction were as follows:
Date RM
12 January 1,200,000
25 March 600,000
 10 June 864,000
16 October 900,000

On 1 January 2015, Waja Bhd arranged a 8% construction loan to finance the construction for
RM1,600,000. In addition to the construction loan, Waja Berhad had the following debt
outstanding throughout 2015:
i. RM2,000,000 loan with interest rate of 7%.
ii. RM3,000,000 loan with interest rate of 6%.

REQUIRED:

(a) Determine the amounts that Waja Berhad should capitalize as the cost of the land.

(b) Calculate the amount of interest capitalized for the year 2015.

(c) Calculate the total cost of the new building.

QUESTION 3
Presented below is information related to equipment owned by Marley Company at
December 31, 2010.
Cost 7,000,000
Accumulated depreciation to date 1,500,000
Value-in-use 5,000,000
Fair value less cost of disposal 4,400,000
Assume that Marley will continue to use this asset in the future. As of December 31, 2010,
the equipment has a remaining useful of 4 years.

REQUIRED:
(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31,
2010.
(b) Prepare the journal entry to record depreciation expense for 2011.
(c) The recoverable amount of the equipment at December 31, 2011, is RM5,250,000.
Prepare the journal entry (if any) necessary to record this increase.

QUESTION 4

Explain the differences in accounting treatment of repairs and maintenance, additions,

improvements and rearrangement.
QUESTION 5

Vege Bhd is a company that sells vegetables. The following information is available from the
company’s inventory records as at 31 December 2018.

Spinach Carrot Broccoli Peas Mixed Chilli

(RM) (RM) Vegetables (RM)
(RM) (RM)
(RM)
Historical cost
– FIFO
213,500 122,500 178,500 21,500 50,000 25,000
method
(in total)
NRV 135,000 84,000 65,000 35,000 70,000 15,000

Although the inventories are recorded at their cost, the company values its inventories at the
Lower of Cost or Net Realisable Value (LCNRV) method due to changes in supplies and/or
demands. Vege Bhd applies the cost of goods sold method and uses an Allowance Account to
record for the write down of the inventory to net realisable value.

REQUIRED:
(Round your answers to the nearest RM)

(a) Assuming that Vege Bhd applies the LCNRV rule to item by item. Determine the
LCNRV as at 31 December 2018.

(b) Prepare the journal entry at 31 December 2018 to account for the write-down of the
inventory to NRV.

(c) Show a partial of Vege’s statement of financial position as at 31 December 2018 to

present the information on its inventory.

(d) Assuming that at the year-end 2018, the account of Allowance to Reduce Inventory to
NRV had a credit balance of RM300,000. For the financial year end 2018, determine
the amount of the gain or loss that would be recorded due to the change in Allowance
to Reduce Inventory at Net Realisable Value. Prepare the related journal entry.

(e) Explain how the application of LCNRV approach may result inconsistency in terms of
its inventory measurement.

QUESTION 5

Suasana Indah Berhad provided the following information during the year 2015:

i. Patent was purchased for RM900,000 on 1 January 2015. The legal fees
incurred was RM10,000. This patent was estimated to has a useful life of 8 years
and legal life of 20 years.
ii. On 5 January 2015, a franchise was purchased for RM480,000. The contractual
life of the franchise was 12 years.

iii. Suasana Indah Berhad incurred research costs to develop a trademark on June
2015 as follows:

RM
Material and supplies 210,000
Staff costs 120,000
Indirect costs 110,000

iv. A copyright with a useful life of 5 years was purchased on 1 July 2015 for
RM250,000 from Arman Berhad.

v. On 31 December 2015, Suasana Indah Berhad acquired 100 percent shares of

Pertama Berhad with a purchase price of RM1,500,000. The fair value of assets
and liabilities of Pertama Berhad at the date of purchased were RM900,000 and
RM150,000, respectively.

vi. The recoverable amount of intangible assets at 31 December 2015 were as

follows:

RM
Patent 700,000
Franchise 300,000
Copyright 230,000

Suasana Indah Berhad used a cost model to account for all intangible assets.

REQUIRED:

(a) Prepare journal entries to record the acquisition of intangible assets and the
research costs incurred for Suasana Indah Berhad during the year 2015.

(b) Calculate the amortization of intangible assets for Suasana Indah Berhad at 31
December 2015.

(c) Calculate the carrying amount of intangibles assets of Suasana Indah Berhad at
31 December 2015.

(d) Calculate the impairment loss of intangible assets and prepare an extract of
Statement of Financial Position for Suasana Indah Berhad at 31 December 2015.