QUESTION 1 (20 MARKS: 36 MINUTES)

Berkat Bhd has two buildings, one in Alor Setar and another one in Sungai Petani, and one freehold land in Pokok Sena. The building in Alor Setar is a four-storey building and it was used as the main office which was purchased on 1 July 2017 at RM5,000,000. The building in Sungai Petani is a seven-storey buiding and is rented out. The cost of the building was RM8,300,000 which was purchased on 1 March 2018. The cost of the land in Pokok Sena was RM4,000,000 and it was purchased on 30 April 2018 with the anticipation of increase in value in the future years due to the economic development in the area.

However, the pandemic COVID-19 has changed the company operation. On 1 November 2020, the company decided to occupy only a small portion of the building in Alor Setar as the main office, and the rest of the building were rented out. The operation of building in Sungai Petani remains as of end of year 2020 (i.e. rented out). The land in Pokok Sena was sold on 30 September 2020 at RM4,300,000. The cost to sell the land was RM100,000.

Additional information:

1. It is estimated that building in Alor Setar and Sungai Petani will evenly provide benefits to the company over its useful life of 20 years.

2. The company uses cost model for plant, property and equipment (PPE) and fair value model for its investment property.

3. Financial year end for the company is 31 December each year.

4. Following are the market value of the property for the year end 2018, 2019 and 2020 based on the professional appraisers valuation:

Property	Fair value 2018 (RM)	Fair value 2019 (RM)	Fair value 2020 (RM)
Building in Alor Setar	-	-	4,400,000
Building in Sungai Petani	8,600,000	7,600,000	7,000,000
Land in Pokok Sena	4,500,000	4,700,000	-

5. On 1 November 2020, the carrying amount of the building in Alor Setar is similar with the fair value.

REQUIRED: (Round your answer to the nearest RM)

(a) Prepare related journal entries for the building in Alor Setar of Berkat Bhd for the years 2019 and 2020. (6 Marks)

(b) Prepare the related journal entries for the building in Sungai Petani of Berkat Bhd for the years 2018, 2019 and 2020. (5 Marks

(c) Prepare the related journal entries for the land in Pokok Sena of Berkat Bhd for the years 2018, 2019 and 2020. (5 Marks)

(d) Assume that the company decides to change to cost model for the subsequent events of the investment properties. Briefly explain the effect of the accounting policy change on the accounting treatment and disclosure of building in Sungai Petani (provide examples where appropriate).