Question 2

On 1 March 2020 Ebb Bhd. acquired a machine from Ally under the following terms:

		RM000
List price of machine		4,500
Import duty		1,300
Delivery fees		50
Electrical installation costs		145
Pre-production testing		5
Purchase of a five-year maintenance contract with Ally (paid in full upon purchase)		60

In addition, the above information Ebb Bhd. was granted a trade discount of 10% on the initial list price of the asset and a settlement discount of 5% if payment for the machine was received within one month of purchase. Ebb Bhd. paid for the plant on 25 March 2020.

The machine is used in the manufacturing of Ebb Bhd. goods.

Required:

1. 1. Identify and list the relevant MFRS.
2. 2. Briefly explain how should the above be accounted for at initial recognition. Determine the amount to be capitalised at 1 March 2020.
3. 3. Briefly explain why some of the items mentioned above are not capitalized and explain how they should be recognised instead.
4. 4. Eliot Bhd depreciates all its machines on straight line basis. It was estimated that the asset has an estimated useful life of 5 years and a residual value of RM50,000. Calculate the depreciation for the machine for the year ending 2020.