A On 1 January 2020, Mariane Bhd issued 500,000 units of 5% convertible debentures at a price of RM100 per unit. Each debenture could be converted into 500 units of ordinary shares in 3 years' time. As at that date, the market rate of non-convertible debentures was 8%. The present value of RM1 at 5% and 8% were as follows: Year 5% 8% 0.9524 0.9259 0.9070 0.8573 0.86380.7938 2 3 On 1 October 2020, Mariane Bhd acquired a debt instrument from Jeram Bhd worth RM200,000 and 100,000 units ordinary shares of Kalam Bhd at RM2.50 per share. For the investment in Jeram Bhd, the company intended to collect contractual cash flows from the investment and eventually would sell them. The company intended to sell the ordinary shares in Kalam Bhd in the near future. Mariane Bhd had incurred RM5,600 brokerage fees for each investment as at the acquisition date. As at the financial year ended 31 December 2020, the fair value of the debt instrument in Jeram Bhd was RM242,000 while the ordinary share price in Kalam Bhd was RM3.10 per share. The company tax rate for year of assessment 2020 was 24%. Required: 1. Determine the values on liability component and equity component of the convertible debentures issued by Mariane Bhd. (3 marks) Discuss whether any deferred tax liability or asset will arise on the initial recognition of the convertible debentures (6 marks) TIL. Explain the classification of each of the investments made in Jeram Bhd and Kalam Bhd in accordance with MFRS 9 Financial Instruments (4 marks) iv. Discuss the accounting treatment on the initial recognition and subsequent measurement of the investments made in Jeram Bhd and Kalam Bhd. (Journal entries are not required) (4 marks) Magika Bhd acquired an equipment at a cost of RM400,000 on 1 January 2017. The equipment was depreciated over its useful life of 10 years. It qualified for an initial allowance of 20% and an annual allowance of 10%. During the current financial year ended 31 December 2020, the company had incurred RM600,000 research and development cost on a new product. In the third quarter of the financial year, the company had met the criteria to capitalise 20% of the research and development cost as part of the intangible asset. The capitalised development cost was amortised over its useful life of 10 years starting from 1 October 2020. The tax authority required all the research and development costs to be written off immediately in computing taxable profit. B The company tax rate for year of assessment 2020 was 24%. Required: i. Discuss whether there are taxable or deductible temporary differences arising from the equipment and capitalised development cost for financial year ended 31 December 2020 in accordance with MFRS 112 Income Taxes. (5 marks) Prepare an extract of Statement of Financial Position of Magika Bhd as at 31 December 2020 showing the carrying amount of the equipment, development cost and deferred tax asset liability, (3 marks) (Total: 25 marks) A On 1 January 2020, Mariane Bhd issued 500,000 units of 5% convertible debentures at a price of RM100 per unit. Each debenture could be converted into 500 units of ordinary shares in 3 years' time. As at that date, the market rate of non-convertible debentures was 8%. The present value of RM1 at 5% and 8% were as follows: Year 5% 8% 0.9524 0.9259 0.9070 0.8573 0.86380.7938 2 3 On 1 October 2020, Mariane Bhd acquired a debt instrument from Jeram Bhd worth RM200,000 and 100,000 units ordinary shares of Kalam Bhd at RM2.50 per share. For the investment in Jeram Bhd, the company intended to collect contractual cash flows from the investment and eventually would sell them. The company intended to sell the ordinary shares in Kalam Bhd in the near future. Mariane Bhd had incurred RM5,600 brokerage fees for each investment as at the acquisition date. As at the financial year ended 31 December 2020, the fair value of the debt instrument in Jeram Bhd was RM242,000 while the ordinary share price in Kalam Bhd was RM3.10 per share. The company tax rate for year of assessment 2020 was 24%. Required: 1. Determine the values on liability component and equity component of the convertible debentures issued by Mariane Bhd. (3 marks) Discuss whether any deferred tax liability or asset will arise on the initial recognition of the convertible debentures (6 marks) TIL. Explain the classification of each of the investments made in Jeram Bhd and Kalam Bhd in accordance with MFRS 9 Financial Instruments (4 marks) iv. Discuss the accounting treatment on the initial recognition and subsequent measurement of the investments made in Jeram Bhd and Kalam Bhd. (Journal entries are not required) (4 marks) Magika Bhd acquired an equipment at a cost of RM400,000 on 1 January 2017. The equipment was depreciated over its useful life of 10 years. It qualified for an initial allowance of 20% and an annual allowance of 10%. During the current financial year ended 31 December 2020, the company had incurred RM600,000 research and development cost on a new product. In the third quarter of the financial year, the company had met the criteria to capitalise 20% of the research and development cost as part of the intangible asset. The capitalised development cost was amortised over its useful life of 10 years starting from 1 October 2020. The tax authority required all the research and development costs to be written off immediately in computing taxable profit. B The company tax rate for year of assessment 2020 was 24%. Required: i. Discuss whether there are taxable or deductible temporary differences arising from the equipment and capitalised development cost for financial year ended 31 December 2020 in accordance with MFRS 112 Income Taxes. (5 marks) Prepare an extract of Statement of Financial Position of Magika Bhd as at 31 December 2020 showing the carrying amount of the equipment, development cost and deferred tax asset liability, (3 marks) (Total: 25 marks)