6. On 1 July 2018, the company started a dairy cattle breeding business to grab the opportunity of increasing demand for fresh milk. For a start, the company has purchased several dairy cattle to meet the demand by its own processing plants. In the future, the company plans to expand the business of fresh milk to the external markets. On 1 July 2018, company purchased the following: 1-year old -20 dairy cattle 2-year old - 30 dairy cattle 3-year old - 10 dairy cattle On 1 January 2019, the company purchased another 5 three-year old dairy cattle and 10 newborn dairy cattle from a local supplier for RM3,200 per dairy cattle and RM550 per newborn dairy cattle, respectively. The supplier allowed the purchases on credit because of the good relationship with the company for so long. The fair value less costs to sell of the cattle are as follows: Age New born 22 year old 1 year old 2 year old 3 year old 3 %2 year old 4 year old As at 1 July 2018 RM 500 650 1,000 2,000 3,000 3,700 4,000 As at 30 June 2019 RM 600 800 1,200 2,400 3,600 3,800 4,900 As of 30 June 2019, no records were made with respect to the dairy cattle business. 7. On 2 January 2019, the company obtained for free from the Malaysian government a license that allows the company to export goods to overseas for an indefinite period. On that date, the fair value of the permit was RM1,000,000. Since it is free, no record was made to account the license. The company adopts a revaluation model to measure the intangible assets. 8. In March 2017, the company enter into a contract with a chicken supplier - Ayam Organik Sdn Bhd to ensure the supply of chicken is not interrupted. However, in May 2019, Ayam Organik Sdn Bhd was sued by the authority due to the farm hygiene issues. As a result, Ayam Organik Sdn Bhd has received negative publicity from the public which also affects Laguna Bhd indirectly. Due to that, the company decided to terminate the contract with Ayam Organik Sdn Bhd on 1 June 2019. On that date, the contract had remaining 9 months. Based on the agreement, Laguna Bhd must place a minimum monthly order of RM25,000 and in the event of the agreement being terminated earlier than its terms, the supplier is entitled for a compensation of RM150,000 for the contract that still has 6 to 9 months 4 remaining terms. As at 30 June 2019, no record has been made for this transaction. 9. On 5 August 2019, it was found that a van purchased in the name of Laguna Bhd was not included in the company's assets list. The vehicle was purchased on 1 May 2018 for RM60,000 and it was paid in cash by the Chief Executive Officer of Laguna Bhd. The company adopts cost model for its motor vehicles. Depreciation of motor vehicles is to be calculated over its estimated useful life of 5 years on straight line method and to be charged as selling and distribution expenses on yearly basis. 10. On 29 June 2019, the company declared a final ordinary dividend of RM12 million in respects of financial year ended 30 June 2019. No payment and no records are made to account for the transaction. 11. 5% debenture refers to a debt instrument that has been issued by the company on 1 July 2014. The debenture is not backed by any company's assets as collateral and has a term of 15 years. The debenture carries a coupon rate of 5% per annum and pays the coupon semiannually. The principle amount is due upon maturity. 12. The current year tax rate is 25%. After the tax calculation is done by an authorized tax agent, the company's income tax expense for the year ended 30 June 2019 was estimated at RM1,512,000. Calculation of the tax expense is takes into account all related expenses and income such as expenses that are not allowed to be tax deductible, double deduction expenses and also capital allowance of the company's assets. 13. The financial statements for the year ended 30 June 2019 were signed and authorized by the board members for publication on 15 September 2019. Required: PART A i. Refer to additional information (1), prepare relevant journal entries to record the changes in the building's value for the year ended 30 June 2019. (Show relevant workings and narrations for the journal is not required). ii. Refer to additional information (6), calculate the total changes in fair value of the dairy cattle for the year ended 30 June 2019 and prepare the relevant journal entries. (Show relevant workings and narrations for the journal is not required). iii. Refer to additional information (7), based on relevant accounting standard, discuss the choice of accounting policy for intangible assets. Also, explain the appropriate accounting treatment if the license is only for a period of ten years. iv. Refer to additional information (8), based on relevant accounting standards, explain the appropriate accounting treatments for the transaction. 5 V. Refer to additional information (9), identify the applicable accounting standards for the transaction and explain the appropriate accounting treatments to record the transactions. vi. Refer to additional information (10), explain the appropriate accounting treatment if the company declares the ordinary final dividend on 15 July 2019. (50 Marks) 6. On 1 July 2018, the company started a dairy cattle breeding business to grab the opportunity of increasing demand for fresh milk. For a start, the company has purchased several dairy cattle to meet the demand by its own processing plants. In the future, the company plans to expand the business of fresh milk to the external markets. On 1 July 2018, company purchased the following: 1-year old -20 dairy cattle 2-year old - 30 dairy cattle 3-year old - 10 dairy cattle On 1 January 2019, the company purchased another 5 three-year old dairy cattle and 10 newborn dairy cattle from a local supplier for RM3,200 per dairy cattle and RM550 per newborn dairy cattle, respectively. The supplier allowed the purchases on credit because of the good relationship with the company for so long. The fair value less costs to sell of the cattle are as follows: Age New born 22 year old 1 year old 2 year old 3 year old 3 %2 year old 4 year old As at 1 July 2018 RM 500 650 1,000 2,000 3,000 3,700 4,000 As at 30 June 2019 RM 600 800 1,200 2,400 3,600 3,800 4,900 As of 30 June 2019, no records were made with respect to the dairy cattle business. 7. On 2 January 2019, the company obtained for free from the Malaysian government a license that allows the company to export goods to overseas for an indefinite period. On that date, the fair value of the permit was RM1,000,000. Since it is free, no record was made to account the license. The company adopts a revaluation model to measure the intangible assets. 8. In March 2017, the company enter into a contract with a chicken supplier - Ayam Organik Sdn Bhd to ensure the supply of chicken is not interrupted. However, in May 2019, Ayam Organik Sdn Bhd was sued by the authority due to the farm hygiene issues. As a result, Ayam Organik Sdn Bhd has received negative publicity from the public which also affects Laguna Bhd indirectly. Due to that, the company decided to terminate the contract with Ayam Organik Sdn Bhd on 1 June 2019. On that date, the contract had remaining 9 months. Based on the agreement, Laguna Bhd must place a minimum monthly order of RM25,000 and in the event of the agreement being terminated earlier than its terms, the supplier is entitled for a compensation of RM150,000 for the contract that still has 6 to 9 months 4 remaining terms. As at 30 June 2019, no record has been made for this transaction. 9. On 5 August 2019, it was found that a van purchased in the name of Laguna Bhd was not included in the company's assets list. The vehicle was purchased on 1 May 2018 for RM60,000 and it was paid in cash by the Chief Executive Officer of Laguna Bhd. The company adopts cost model for its motor vehicles. Depreciation of motor vehicles is to be calculated over its estimated useful life of 5 years on straight line method and to be charged as selling and distribution expenses on yearly basis. 10. On 29 June 2019, the company declared a final ordinary dividend of RM12 million in respects of financial year ended 30 June 2019. No payment and no records are made to account for the transaction. 11. 5% debenture refers to a debt instrument that has been issued by the company on 1 July 2014. The debenture is not backed by any company's assets as collateral and has a term of 15 years. The debenture carries a coupon rate of 5% per annum and pays the coupon semiannually. The principle amount is due upon maturity. 12. The current year tax rate is 25%. After the tax calculation is done by an authorized tax agent, the company's income tax expense for the year ended 30 June 2019 was estimated at RM1,512,000. Calculation of the tax expense is takes into account all related expenses and income such as expenses that are not allowed to be tax deductible, double deduction expenses and also capital allowance of the company's assets. 13. The financial statements for the year ended 30 June 2019 were signed and authorized by the board members for publication on 15 September 2019. Required: PART A i. Refer to additional information (1), prepare relevant journal entries to record the changes in the building's value for the year ended 30 June 2019. (Show relevant workings and narrations for the journal is not required). ii. Refer to additional information (6), calculate the total changes in fair value of the dairy cattle for the year ended 30 June 2019 and prepare the relevant journal entries. (Show relevant workings and narrations for the journal is not required). iii. Refer to additional information (7), based on relevant accounting standard, discuss the choice of accounting policy for intangible assets. Also, explain the appropriate accounting treatment if the license is only for a period of ten years. iv. Refer to additional information (8), based on relevant accounting standards, explain the appropriate accounting treatments for the transaction. 5 V. Refer to additional information (9), identify the applicable accounting standards for the transaction and explain the appropriate accounting treatments to record the transactions. vi. Refer to additional information (10), explain the appropriate accounting treatment if the company declares the ordinary final dividend on 15 July 2019. (50 Marks)