Question 2 On 1 January 2017, Sam Nom Manufacturing Berhad (SNMB) acquired a plant costing RM1 million whose economic life is estimated to be 10 years with no scrap value. The plant is depreciated on a straight-line basis. On 1 January 2020, SNMB incurred the following costs on the plant: Descriptions RM 6000 Repairs and annual overhaul of the plant 40 Replacement of a major part of the plant which reduced the operating costs 200 The carrying amount of the part being replaced 80 On 1 July 2020, SNMB did a major renovation to their office building. The renovation was to repair rooftop and part of the office building which were damaged during the recent major storm and flood. The cost was RM250,000. As of 1 January 2020, the existing office building was valued at RM3 million with a carrying value RM2.5 million. SNMB provide yearly depreciation at 10% on cost for office building. The land was separately recorded at RM4 million using the revaluation model. As of 31 December 2020, the market value of the land is RM4.5 million. On 31 December 2020, a machine worth RM150,000 was being disposed. The machine was damaged beyond repair due to the flood. The carrying value of the machine was RM100,000. To replace it, another machine worth RM250,000 was purchased for cash. SNMB bought several paintings from renowned oversea artists for RM1 million on 1 February 2020. SNMB intend to sell the painting in the future for capital appreciation. Currently, all the paintings were placed at the board meeting room. One of the paintings was being sold for RM30,000 in December 2020. The painting was purchased for RM10,000. On 1 January 2019, SNMB bought another land that SNMB intend to build their warehouse. SNMB decided to use revaluation model. The cost of the land is RM10 million. On 31 December 2019, the fair value of the land was RM10.6 million. On 31 December 2020, the land's value reduced to RM10.2 million as a result of sale glut. Architecture fees of RM40,000 and clearing cost of RM360,000 were paid in November 2020. Required: a) State TWO (2) conditions that an entity needs to fulfill in order to recognise an expenditure as a Property, Plant and Equipment (PPE) under MFRS116. Illustrate the TWO (2) conditions through examples. (4 marks) b) Journalise the expenditures that SNMB incurred in the year 2020. Assume all expenditures are paid through cash. Support your journals with reasons. (15 marks) c) Prepare in a tabular form the disclosure for PPE that will be made in SNMB's notes to the accounts as at 31 December 2020. (6 marks) (Total: 25 Marks)
