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QUESTION 2 Husna Bhd is a local soft drink manufacturing company located in the Kota Samarahan area in East Malaysia. The company has built
QUESTION 2 Husna Bhd is a local soft drink manufacturing company located in the Kota Samarahan area in East Malaysia. The company has built a new building to cater for the increase in customers' demand. The construction of the building was started on 1 July 2019 and was ready for operation on 1 July 2020. The estimated useful life of the building is ten years. The costs incurred for the construction of the building are as follows: RM Contractor's cost Cost of demolish the old building structure 1,500,000 200,000 Income from sales of the scraps of the old building 20,000 Direct material including material wastage of RM80,000 800,000 Architect's fees (10% of contractor's cost) 150,000 Labour cost in the construction 350,000 Engineering cost 185,000 General administrative overhead cost 48,000 At the end of the useful life, the company is required to dismantle the building, and the estimated dismantling cost is RM30,000. The present value of the future payment for the dismantling costs is RM15,000. The depreciation of the building is calculated using the straight-line method and is to be charged to the profit or loss account on a yearly basis. On 15 December 2020, the company has spent a total of RM300,000 to repair minor damages to the building due to recent windstorm such as leaking roofs and other repair and maintenance works. Husna Bhd closes its books on 30 June each year. Required: a. State the recognition criteria of the new building in accordance with MFRS 116 Property, Plant, and Equipment. (3 marks) b. Discuss the subsequent measurement model available for the building. (5 marks) c. Calculate and discuss the cost of the building at the initial recognition. (8 marks) d. Explain the accounting treatment on the expenditures incurred on 15 December 2020. (4 marks)
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