On 1 July 2017, Telus Bhd received a government grant of RM650,000 to acquire a plant. The fair value of the plant is RM3,200,000. The expected useful life of the plant is 50 years with a nil residual value. The company adopts the straight-line monthly basis method of depreciation. Telus Bhd treats the grant received as a deduction against the asset.

On 1 January 2020, Telus Bhd no longer comply to the condition attached to the grant and the grant has become repayable in full.

The financial year of Telus Bhd ends on every 31 December.

1. Based on the paragraph above, the relevant journal entry for the year ended 31 December

2019 is:

1. Dr SOPL depreciation RM51,000; Cr Accumulated Depreciation RM51,000.
2. Dr SOPL depreciation RM64,000; Cr Accumulated Depreciation RM64,000.
3. Dr SOPL Deferred Income RM13,000; Cr Government Grant RM13,000.
4. Dr Government Grant RM13,000; Cr SOPL Deferred Income RM13,000.

(2 marks)

2. Based on paragraph above, the carrying amount of plant as at 31 December 2019 is:

1. RM3,008,000
2. RM3,040,000
3. RM2,422,500
4. RM2,397,000

(2 marks)

3. In the absence of the grant, the accumulated depreciation of the plant on 1 January 2020

is:

1. RM192,000
2. RM127,500
3. RM160,000
4. RM153,000

(2 marks)

4. The relevant journal entry to record the grant repayable on 1 January 2020:

1. Dr Plant RM650,000; Dr Loss arising on grant repayable RM32,500; Cr Grant repayable RM650,000; Cr Accumulated depreciation RM32,500
2. Dr Plant RM650,000; Dr Accumulated depreciation RM32,500; Cr Grant repayable RM650,000; Cr Gain arising on grant repayable RM32,500
3. Dr Plant RM650,000; Dr Loss arising on grant repayable RM39,000; Cr Grant repayable RM650,000; Cr Accumulated depreciation RM39,000
4. Dr Plant RM650,000; Dr Accumulated depreciation RM39,000; Cr Grant repayable RM650,000; Cr Gain arising on grant repayable RM39,000

(2 marks)

On 1 July 2018, ARR Bhd moves out from its present head office in Pontian to a new office in Johor Bahru. The building in Pontian was then rented out to Itchy Bhd. The building in Pontian was acquired on 1 July 2014 at a purchase price of RM4,000,000 and the company also incurred legal cost of RM250,000. It was depreciated on a straight-line basis over 40 years. The fair value of the building on 1 July 2018 was RM4,000,000.

Due to its business expansion strategy, ARR Bhd purchased a 5-storey building in Segamat for RM1,000,000 on 1 October 2020. Four stories are occupied for the companys business operation. The fifth floor is rented out to an independent third party. The floors cannot be sold separately.

5. What is the initial cost of building in Pontian on 1 July 2014?

a) RM4,000,000

b) RM250,000

c) RM4,250,000

d) RM3,750,000

(2 marks)

6. What is the accumulated depreciation of building in Pontian as at 30 June 2016?

a) RM106,250

b) RM100,000

c) RM212,500

d) RM200,000

(2 marks)

7. Calculate the surplus / deficit due to the transfer or change in use of the building in Pontian

as at 1 July 2018.

a) Surplus RM175,000

b) Deficit RM175,000

c) Surplus RM400,000

d) Deficit RM400,000

(2 marks)

8. Classify the building in Segamat based on relevant Malaysian Financial Reporting Standard.

1. The entire building shall be classified as leased property based on MFRS16.
2. The entire building shall be classified as property, plant and equipment based on MFRS116.
3. The entire building shall be classified as an investment property based on MFRS140.
4. The one floor shall be recognized as an investment property based on MFRS140 and the remaining floors shall be recognized as property, plant and equipment based on MFRS116.

(2 marks)

ARR Bhd adopts the revaluation model for its building under MFRS 116 Property, Plant and Equipment and fair value model for its building under MFRS 140 Investment Property. The companys financial year ends on 30 June.