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PART 1 Serba Ada Hardware Bhd (SAHB) is a Malaysian company, selling range of products like tools, equipment, electric supplies, furniture supplies, woodwork equipment,
PART 1 Serba Ada Hardware Bhd (SAHB) is a Malaysian company, selling range of products like tools, equipment, electric supplies, furniture supplies, woodwork equipment, and interiors for residential as well as commercial spaces. The company has a few outlets in Northern Region of Malaysia and also involves in online sales. Since its commencement, SAHB has been very successful. With the increasing orders received by a company, SAHB has acquired a land site to construct a new warehouse for the company's operation. The company bought a three-acre land with and old factory building in the year 2021 at the price of RM500,000. SAHB paid RM2,000 for real estate taxes and RM1,500 real estate agent commission fees. The land ownership transfer was just completed and an additional cost of RM30,000 was incurred for clearing the site. SAHB received RM8,000 from the residual value of demolished the old building. In order to ensure the safety of the property, SAHB incurred a cost totalled RM20,000 for installation of fences around the property. The plan has been arranged accordingly to ensure that the warehouse could be constructed as soon as the site was ready. However, the loan applied from Best Bank was rejected and all related construction activities had to be temporarily suspended. SAHB then made a new loan application with Good Bank. While waiting for the loan approval, the management team of SAHB decided to utilize the site to generate additional income for the company. The site was rented out for car boot sales activities in the morning and food truck operation at night. In the first month of operation, SAHB earned RM80,000 related to rental service revenue and the related costs included RM4,800 for staff salary, RM2,200 for administration expense and RM3,000 for other expenses. After one month of operation, the bank loan was approved and SAHB immediately stopped the site renting operation and continued with its initial intention to construct the warehouse. The total cost to construct the warehouse, from excavation until completion, was RM880,000 (including RM3,200 cost of inefficiencies caused by a labour strike). This cost excluded the revenue and expenses related to the site rental operation. Since the rental revenue and expenses were incurred on the construction site, Ms. Jenny, the accountant of SAHB was uncertain whether to include these revenue and expenses to the cost of land or cost of the constructed warehouse. You are required to: (a) Identify the issue(s) faced by the accountant of SAHB. (CTPS Question-Problem identification) (b) (c) Analyse the problem(s) faced by SAHB by referring to the MFRS 116 Property, Plant and Equipment (Hint: Find the related paragraph in the standard). (CTPS Question-Problem analysis) Help the accountant of SAHB to make a decision related to the above issue(s) (CTPS Question - Generation of solution, evaluation and decision making). PART 2 The Covid-19 pandemic that started in early 2020 has taken a toll on SAHB business tremendously. By November 2021, its sales had declined by more than 50 percent, compared to the same period before the Covid-19. The management of SAHB were worried that SAHB would not be able to reach its forecasted sales and profits for 2021. This was the main concern of the SAHB's management as their compensations are tied with the company's profitability. 2
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