XYZ Bhd is a computer manufacturer. It adopts a 31 December accounting year-end. On 1 January 2016, the company used its excess cash to buy a factory for investment purposes. The factory was rented out to another manufacturer. The factory costs RM50,000,000, and was expected to have a useful life of 50 years with no salvage value. XYZ Bhd uses the straight-line depreciation method for all depreciable assets. The XYZ Bhd incurred the following costs in connection with the purchase of the factory: Legal and agency fees Soft launching cost to market for tenants Administrative expenses Total Costs RM 500,000 100,000 150,000 750,000 The market value of the factory was RM55,000,000 as at 31 December 2016, and RM47,000,000 as at 31 December 2018. There was no change in the market value as at 31 December 2017. However, due to the economic downturn, on 1 January 2019, the tenant moved out from the rented factory and ceased its tenancy agreement with the XYZ Bhd. Thus, on 1 January 2019 XYZ Bhd decided to occupy the factory and expend its manufacturing lines. The company adopts the revaluation model for land and buildings which are used in the business. The policy of XYZ Bhd is to revalue its land annually and its buildings every two years. Additionally, during the year 2020, XYZ Bhd has made the following transactions: 1 January 2020 1 February 2020 30 April 2020 1 July 2020 Using a financing facility from ABC bank, XYZ Bhd acquired a piece of freehold land for RM500,000,000. The land was acquired for building a company's warehouse. XYZ Bhd purchased a machine of RM900,000 by cash. The machine was expected to have a useful life of 20 years with RM50,000 residual value A new lorry was acquired on credit for RM200,000. Its expected useful life is 8 years with a residual value of RM20,000. The company also paid RM8,000 for painting and lettering upon acquisition of the lorry. A new administrative building was acquired on credit for RM20,000,000 and expected to have a useful life of 40 years with no residual value. The land was revalued at RM560,000,000 The factory was revalued at RM52,000,000. Using Para 35 of MFRS116, XYZ Bhd eliminated the accumulated depreciation against the gross carrying value. The estimated residual value of machine is revised to RM70,000 and the useful life is revised to a total of 16 years. 31 December 2020 31 December 2020 31 December 2020 2/10 ACT3102 CONFIDENTIAL Required: a) Explain how XYZ Bhd accounted for the acquisition of the new factory and determine the acquisition cost on 1 January 2016. (4 marks) b) Provide relevant journal entries for the factory and the cost incurred for the first three years i.e. 2016, 2017 and 2018 using both the cost model and fair value model. (12 marks)