Question 1

Redang Chalet Sdn Bhd (RCSB) rents out chalet to tourists at a popular beach in Redang, Terengganu. RCSB own 10 chalets, in which the construction cost amounted to RM1 million. Each chalet is depreciated at 20% per annum.

In addition to the chalet, RCSB rents out cars to tourists visiting the island. The cars were bought three years ago at a total cost of RM150,000 and are being written off over a period of five years. Recently tsunami hit the island and the demand for car-hire has dropped tremendously. RCSB could only generate RM45,000 cash for the balanced two years. Alternatively, RCSB can sell the cars for RM40,000 as at 31 December 2017.

RCSBs chalets are located in remote area in Redang Beach. As advised by the local Water Council, 10 water pumps were installed at the area on 1 January 2017 to draw fresh water from dig well. Each pump cost RCSB RM3,000 with an estimated useful life of 5 years. 6 months after, 4 of the water pumps were damaged during hailstorms. RCSB has not decided whether they want to sell the water pump as scrap or repair the pumps. The scrap value of each pump as at 31 December 2017 is RM500.

On 1 January 2015, RCSB bought a nearby land that RCSB intend to build their office building. RCSB decide to use revaluation model. The cost of the land is RM2 million. On 1 January 2016, the fair value of the land was RM2.2 million. On 1 January 2016, the value of the land reduced to RM1.9 million as a result of rat infestation. Clearing and cleaning cost amounting to RM1 million as at 31 December 2017.

RCSB bought several paintings from several local street artists for RM3,000 on 1 February 2017. RCSB intend to sell the painting later for capital appreciation. Currently, all the paintings were placed at the board meeting room. As at 31 December 2017, the fair value of the paintings based on professional valuer estimate stand at RM5,000. In addition, RCSB bought several antiques for RM150,000 in May 2017. These antiques were sold for RM200,000 in July 2017. Another set of antiques were purchased in September for RM300,000. As at 31 December 2017, these antiques were valued at RM350,000.

RCSBs top management make a decision to venture into agriculture business as another source of income. An agriculture land was purchased on 1 January 2017 for RM400,000. Clearing cost amounted to RM50,000. RCSB decided to use revaluation model for this land. RCSB decided to rear chickens, goats and cow. Two chicken coup and a cow barn need to be built to house these cattle. RCSB bought wires and woods to build the chicken coup and the barn. The construction of the chicken coups was RM12,000 while the cost of the wires and woods amounting to RM10,000. RCSB paid a contractor RM3,000 to build the cow barn. RCSB decided the useful life of the chicken coup to be 2 years while of the cow barn is 5 years without any residual value.

On 1 February 2017 RCSB purchased 10 calves and 10 kids. The purchased price and fair value of the cattle are stated in table below. The chicks were purchased in December 2017. As at 31 December 2017, a calf and a goat died due to food and mouth disease.

	1 January 2017 Purchased Price (RM)	31 December 2017 Fair Value (RM)
A calf	550	600
A kid	250	300
2 weeks old 500 chicks		1,000
1-year old calf		700
1-year old goat		400

There were existing 30 durian threes that RCSB didnt cleared out when they bought the agriculture land. The market price of these durian trees obtained from professional valuer was RM2,000 each. The useful life of these trees was estimated to be 5 years. In addition, purchased 50 durian trees sapling in December 2017 as well to be planted at the farm. The

trees were purchased for future source of income. Each of the durian tree sapling cost RM200. RCSB also purchased RM5,000 worth of cow grass sapling to be planted at the farm. The cow grass will be used to feed the cattle when the grass matures.

RCSB bought on 1 June 2017 shares of Company A. The shares were only 1% of total shares issued. Total amount paid for the shares were RM100,000. At the end of the year 2017, the shares increased in value to RM120,000. RCSB intend to sell the shares within 12 months from purchased.

Required:

b) Based on the above, discuss on how you would account for the following items by reference to the appropriates approved accounting standards. Support your arguments with reasons.

1. The cars and the water pumps.
2. The 2 lands and the clearing cost.
3. The paintings and the antiques.
4. The agriculture land, the chicken coups, the wires, the woods and the construction costs of the cow barn.
5. The calves, the goats and the 500 chicks.
6. The durian trees, the durian tree sapling and cow grass.
7. The investment in Company A.

c) Based on the relevant approved accounting standards that you have chosen in (b), journalize each of the transactions that affect RCSBs financial records for the year ended 31 December 2016 and 31 December 2017. Show all your workings.

d) Prepare an extract of RCSBs Statement of Profit or Loss for the year ended 31 December 2017 and Statement of Financial Position as at 31 December 2017. You are required to show the summarized figures that incorporate all the items in part (b) above.