Question 3

On 1 January 2020, Oui Bhd purchased a landed property at a cost of RM4,870,000. The building is rented out to a tenant. Oui Bhd also incurs the following costs in connection with the purchase of the property:

	RM
Legal fees and stamp duty	178,500
Feng Shui cost for re-arrangements of interiors	25,800
Real estate agency fees	240,500

The property is classified as investment property and accounted for under the fair value model. On 31 December of 2020, the market value of the investment property is RM5,850,000. At 31 November 2021, the property was sold to the existing tenant for a consideration of RM6,070,000.

Required:

1. Identify and list the relevant MFRS.

2. Determine the cost of the investment property on initial recognition.

3. Briefly explain why certain of the item(s) mentioned above are not capitalized and explain how they should be recognised instead.

4. Calculate the gain or loss on disposal and show the journal entry for the disposal.