(a) Mawar Berhad is in the process of preparing its financial statements for the first three...

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(a) Mawar Berhad is in the process of preparing its financial statements for the first three months of 2022. The following events took place during the first quarter of 2022 (assume all amounts are material): The company changed the accounting policy with regards to depreciation of its machineries. On 1 January 2022, accumulated depreciation under unit of production method was RM2.8 million. However, if the straight-line method has been used, the accumulated depreciation on this date would have been RM2.3 million. The remaining life of machineries is two years. The cost of the machineries at the time of acquisition was RM4 million. The company closes its production plants in February each year to make way for yearly repairs and maintenance services. The company estimates that the cost of repairs and maintenance in 2022 would be RM900,000. ● The company has redeemed bonds with a face value of RM6 million at a cost of RM5.76 million. The company plans to issue new debentures at lower interest rate. Required: Advice the management of Mawar Berhad on the accounting treatment for the events above in the financial statements for the financial year ended 31 March 2022 based on MFRS 134 Interim Financial Reporting. (6 Marks) (b) During the financial year ended 30 June 2022, Saga Berhad has involved in several transactions with the following business entities and individuals: Rose Berhad who supplies machine components to Saga Berhad where one of its directors is the sister of the Chief Executive Officer of Saga Berhad. The company has appointed CDB Wealth Sdn Bhd as a trustee to administer the gratuity fund for its employees. Mrs Lee who conducted various development and training programs for employees of the company is also the wife of Saga Berhad's Chief Executive Officer. Required: Determine whether the above business entities or individuals are related parties of the company. Support your answer with references to MFRS 124 Related Party Disclosures. (c) The following information relates to Aircraft Division which is a cash-generating unit of Airfly Berhad as at 31 December 2021. Property, plant and equipment Goodwill Trade receivables Cash and cash equivalents Trade payables Net assets (6 Marks) RM (million) 2,600 200 200 60 (2,700) 360 The management has noticed the increasing cost of production which resulted in operating loss during the current financial year and is deciding whether a write-down of assets is required. Management estimated its future net cash flows from the production line is RM400 million. At the same time, the management received an offer to purchase the division for RM335 million, net of selling cost. All other identifiable assets' and liabilities' book and fair value are the same. Required: (i) Prepare journal entry (if any) to record the impairment at 31 December 2021. (ii) Assume that at 31 December 2022, the division's recoverable amount increased to RM345 million. Prepare journal entry (if any) to record the increase in fair value. (8 Marks) (a) Mawar Berhad is in the process of preparing its financial statements for the first three months of 2022. The following events took place during the first quarter of 2022 (assume all amounts are material): The company changed the accounting policy with regards to depreciation of its machineries. On 1 January 2022, accumulated depreciation under unit of production method was RM2.8 million. However, if the straight-line method has been used, the accumulated depreciation on this date would have been RM2.3 million. The remaining life of machineries is two years. The cost of the machineries at the time of acquisition was RM4 million. The company closes its production plants in February each year to make way for yearly repairs and maintenance services. The company estimates that the cost of repairs and maintenance in 2022 would be RM900,000. ● The company has redeemed bonds with a face value of RM6 million at a cost of RM5.76 million. The company plans to issue new debentures at lower interest rate. Required: Advice the management of Mawar Berhad on the accounting treatment for the events above in the financial statements for the financial year ended 31 March 2022 based on MFRS 134 Interim Financial Reporting. (6 Marks) (b) During the financial year ended 30 June 2022, Saga Berhad has involved in several transactions with the following business entities and individuals: Rose Berhad who supplies machine components to Saga Berhad where one of its directors is the sister of the Chief Executive Officer of Saga Berhad. The company has appointed CDB Wealth Sdn Bhd as a trustee to administer the gratuity fund for its employees. Mrs Lee who conducted various development and training programs for employees of the company is also the wife of Saga Berhad's Chief Executive Officer. Required: Determine whether the above business entities or individuals are related parties of the company. Support your answer with references to MFRS 124 Related Party Disclosures. (c) The following information relates to Aircraft Division which is a cash-generating unit of Airfly Berhad as at 31 December 2021. Property, plant and equipment Goodwill Trade receivables Cash and cash equivalents Trade payables Net assets (6 Marks) RM (million) 2,600 200 200 60 (2,700) 360 The management has noticed the increasing cost of production which resulted in operating loss during the current financial year and is deciding whether a write-down of assets is required. Management estimated its future net cash flows from the production line is RM400 million. At the same time, the management received an offer to purchase the division for RM335 million, net of selling cost. All other identifiable assets' and liabilities' book and fair value are the same. Required: (i) Prepare journal entry (if any) to record the impairment at 31 December 2021. (ii) Assume that at 31 December 2022, the division's recoverable amount increased to RM345 million. Prepare journal entry (if any) to record the increase in fair value. (8 Marks)

Answer rating: 100% (QA)

a Accounting Treatment for Events in the Financial Statements for the Year Ended 31 March 2022 based on MFRS 134 1 Change in Accounting Policy for Depreciation As per MFRS 134 when there is a change i... View the full answer