? (Total: 20 marks) QUESTION 2 Larmne Bhd is a company engaged in the production of rubber gloves. In preparing the accounts for the year ended 30 June 2018, the assistant accountant requested clarifications on the accounting treatment regarding some items of non-current assets. Depreciation is recognised in the Statement of profit or loss on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not subjected to depreciation. Depreciation is provided based on the period of ownership: Buildings 50 years Motor vehicles Plant and machinery 5 years 10 years Additional information: 1. On 1 July 2016, Larme received a government grant of RM1,400,000 to be used for the purchase of the building costing RM5,900,000. Larme had credited the full amount of the grant to the Statement of profit or loss ending 30 June 2017. However, it is the policy of the company to use the "write-off against asset" method in presenting its grant received from the government. No adjustment has been made to reflect this error. 2. On 1 July 2017, a major component of the plant was replaced and the new component cost RM650,000. The replacement meets the recognition criteria of an asset. The whole plant was acquired in January 2014 and the component that was replaced was identified with a cost of RM300,000. There is no change in the remaining useful life of the plant. 3. On 1 April 2018, due to an expansion of its operations, Larme converted its investment property into an administration building. The investment property was measured using the fair value model and had a carrying value of RM3,200,000 on 1 July 2017. The fair value of the property on 1 April 2018 was RM3,500,000. The remaining useful life of the building on 1 April 2018 was 25 years. 4. Larme had made a commitment to sell a plant on 1 July 2017. The plant is available for immediate sale. The plant was acquired for RM6,500,000 and its carrying amount on 1 July 2017 was RM2,600,000. The estimated selling price given by a broker was RM2,000,000 and there is a charge of 5% commission on the selling price. Required: a. Prepare the journal entries to correct the prior year error referred in note (1) above. b. Discuss the accounting treatment of the subsequent expenditure on the new component referred in note (2) above. How is the old component to be treated? Show journal entries to record the transaction relating to the replacement of the component. 2 C Discuss the accounting treatment of the transfer of investment property to owner- occupied property referred to in note (3) above. d. Discuss the accounting treatment and the measurement of the plant referred to in note (4) above. (Total: 20 marks)