QUESTION 1

On 1 January 2020, Mega Style Bhd acquired a building at a cost of RM11,000,000. The estimated economic life of the asset was 10 years. The fair value of the asset as at 31 December 2020 was RM13,500,000. It is the policy of the company to adopt revaluation model and fair value model for its property, plant and equipment and investment property respectively subsequent to its initial measurement and recognition.

Required:

1. Mega Style Bhd rented out the building to independent third party in return for monthly rental payments of RM50,000. Discuss the accounting treatment of the asset for the year ended 31 December 2020. (State the relevant MFRS.)

(5 marks)

3. The building is used by Mega Style Bhd as the headquarters where administration and marketing department operate. Discuss the accounting treatment of the building for the year ended 31 December 2020. (State the relevant MFRS).

(5 marks)

(Total: 10 marks)