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 run the business at Kuala Nerang. Perotiga Bhd acquired the office building but the factory building 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
Contractors fee	-	12,000,000
Installation and technical cost	900,000	2,500,000

Perotiga Bhd received 5% trade discount for the office budling. The consultancy fees paid to Smart Click Sdn Bhd consists of consultation to PerotigaBhd for the acquisition of the office building amounting to RM470,000 and also 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 both office building and factory building is 50 years.

Required:

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

(10 marks)

B. Proten Bhd purchased a machinery costing RM500,000 on 1 January 2014 and the machinery 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:

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

(2 marks)

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

(2 marks)

C. Suzuku Bhd is a manufacturing company in Negeri Sembilan which owns two lands. 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 1 July 1999	Fair value on 1 July 2009	Fair value on 1 January 2018
	RM	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 Bhdstarted 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 was RM800,000. In the middle of 2018, there was a huge flood in Seremban and it had significant adverse impacts on the administrative building where major parts of the building were damaged. Hence, Suzuka Bhdconducted an impairment test on 1 July 2018. The fair value less cost to sell was RM500,000 while the value 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.

(5 marks)

ii. Calculate the balance of the following accounts as at 31 December 2018 based on the information related to the plant above:

a. Plant account

b. Accumulated Depreciation account

(3 marks)

iii. Discuss the accounting treatment of the administrative building on 1 July 2018.

(4 marks)

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
Initial cost on 1 January 2016 (RM)	4,500,000	8,250,000	50,000
Useful life (years)	Unlimited	50	5
Fair value on 1 January 2018	4,300,000	8,544,000	35,000
Subsequent measurement	Revaluation Model	Revaluation Model	Cost Model

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

Required:

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