Blueberry Confectionary Bhd (BCB) was started as a small bakery appliances supplier for almost 10 years in Kuala Lumpur. In 2015, BCB ventures into new line of business that offers customised bakery equipment and machinery based on specifications from customers. BCB’s head office and factory are located in Kepong, Kuala Lumpur. The management of BCB has proposed several strategies to ensure they remain in business after unexpected crisis happened. One of the proposals is to operate another one factory to cater customers’ customised equipment from southern region in 2021.
The following scenarios occurred during January until December 2020. The management of BCB seek your evaluation and explanation pertaining to the following scenarios; before they make decision on the proposed plan.
(1) 5-tonne lorry
On 20 January 2020, BCB purchased a 5-tonne lorry. The negotiated purchase price was RM250,000 including RM15,000 of refundable purchase taxes. The company also paid insurance and road tax RM2,550 and printing of company’s logo RM3,000. On 5 May 2020, the company installs a spare-tyre holder to the lorry. The cost incurred was RM2,300. The estimated useful life of the lorry is 10 years. As the production of customised equipment has expected to drop in year 2020, routine service and maintenance is to be incurred for every 2-month costing RM2,500 for each service session.
Machinery
On 15 February 2020, BCB acquired an automated machinery for RM300,000. The automated machinery is expected to cater the complexities of customised orders from customers. BCB estimated the useful life of the machinery as 15 years and its residual value as nil. Furthermore, management believe that the straight-line method reflects the pattern in which it expects to consume the machinery’s future economic benefits.
The machinery was installed and ready for use as intended by BCB by 15 March 2020. The supplier has agreed to provide hands-on training to operate the automated machinery as it generally designed differently compared to conventional machinery. However, because of the movement control order by the Malaysian Government in March 2020, the supplier was delayed in the retraining the staff. As the retraining was conducted in May 2020, the production only began on 1 June 2020.
In order to facilitate the assets purchase, BCB is considering applying for a bank loan.
You are required to:
(i) Discuss briefly why the information about the 5-tonne lorry and automated machinery are important to the bank.

(ii) Discuss whether:
a) the 5-tonne lorry is an asset according to the Conceptual Framework.
b) the automated machinery is a Property, Plant and Equipment in accordance with MFRS 116.
(iii) Determinethecarryingamountof5-tonnelorrytoberecognised:

a) in the financial statements on 20 January 2020.
b) in the financial statements on 31 December 2020.
(iv) Discuss on how BCB should depreciate the automated machinery?