Aku Borhad King (ABK) Sdn. Bhd. started their business on 1st August 2000. The following are...

 

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Aku Borhad King (ABK) Sdn. Bhd. started their business on 1st August 2000. The following are description of ABK non-current assets. Non-current Asset Useful life Plant Equipment 20 years Acquisition date 1st August 2007 Acquisition cost RM800,000.00 16 years 1st August 2007 RM200,000.00 Patent 5 years 1st August 2008 RM80,000.00 All of the assets were recognized at cost and uses straight line method for depreciations. Types and rates of capital allowance for non-current assets were as follows: Types of allowance Initial allowance Annual allowance Types of assets All types of asset Rate (%) 30 Motor vehicles and heavy machinery 20 14 Office equipment, furniture and fittings Computer 10 40 Plant and Machinery On 1st August 2011, ABK adopted the revaluation model to value its plant, equipment and patent. Below are revaluation date and fair value. Date Plant 1st August 2011 RM660,000.00 31st July 2014 RM552,300.00 31st July 2017 Equipment RM180,000.00 Patent RM50,000.00 RM145,350.00 RM90,000.00 RM400,000.00 In June 2017, there was a gas leaking from a nearby illegal laboratory which caused a release of experimental bio hazard chemical that turned nearby community into a zombie like state. These zombies attacked ABK factory which completely destroyed their plant and equipment. ABK believed its plant and equipment were impaired due to this horrible event. ABK carried out impairment tests in 31st July 2017 and found that its plant and equipment were impaired. If ABK were to dispose its plant and equipment, the fair value after disposal costs would be RM400,000.00 and RM90,000.00 respectively. If ABK were to continue using its impaired assets, benefit generated by the plant was expected to be RM35,000.00 for 2018 and RM 40,000.00 for its remaining years. As for equipment, the value in use is RM85,000.00. On 28th July 2019, ABK conducted another impairment tests and found the following values for plant and equipment: Types of amount Fair Value after disposal cost Value in use Plant RM330,000.00 RM340,000.00 Equipment RM60,000.00 RM64,000.00 ABK reported pre-tax income of RM400,000.00 per annum between 2010 to 2013. The cost of capital is 6% and tax rates were 24%. REQUIRED: a. Discuss the accounting treatments for related assets, supported by detailed calculations for the following: i. Revaluation treatment for the year ended 2011 and 2014. ii. Impairment loss for the year ended 2017. iii. Reversal of impairment loss for the year ended 2019. b. Assuming there were no other transactions causing temporary tax differences, prepare journal entries for deferred tax arises from depreciable assets for the year ended 2010- 2013 (show supporting calculations) Aku Borhad King (ABK) Sdn. Bhd. started their business on 1st August 2000. The following are description of ABK non-current assets. Non-current Asset Useful life Plant Equipment 20 years Acquisition date 1st August 2007 Acquisition cost RM800,000.00 16 years 1st August 2007 RM200,000.00 Patent 5 years 1st August 2008 RM80,000.00 All of the assets were recognized at cost and uses straight line method for depreciations. Types and rates of capital allowance for non-current assets were as follows: Types of allowance Initial allowance Annual allowance Types of assets All types of asset Rate (%) 30 Motor vehicles and heavy machinery 20 14 Office equipment, furniture and fittings Computer 10 40 Plant and Machinery On 1st August 2011, ABK adopted the revaluation model to value its plant, equipment and patent. Below are revaluation date and fair value. Date Plant 1st August 2011 RM660,000.00 31st July 2014 RM552,300.00 31st July 2017 Equipment RM180,000.00 Patent RM50,000.00 RM145,350.00 RM90,000.00 RM400,000.00 In June 2017, there was a gas leaking from a nearby illegal laboratory which caused a release of experimental bio hazard chemical that turned nearby community into a zombie like state. These zombies attacked ABK factory which completely destroyed their plant and equipment. ABK believed its plant and equipment were impaired due to this horrible event. ABK carried out impairment tests in 31st July 2017 and found that its plant and equipment were impaired. If ABK were to dispose its plant and equipment, the fair value after disposal costs would be RM400,000.00 and RM90,000.00 respectively. If ABK were to continue using its impaired assets, benefit generated by the plant was expected to be RM35,000.00 for 2018 and RM 40,000.00 for its remaining years. As for equipment, the value in use is RM85,000.00. On 28th July 2019, ABK conducted another impairment tests and found the following values for plant and equipment: Types of amount Fair Value after disposal cost Value in use Plant RM330,000.00 RM340,000.00 Equipment RM60,000.00 RM64,000.00 ABK reported pre-tax income of RM400,000.00 per annum between 2010 to 2013. The cost of capital is 6% and tax rates were 24%. REQUIRED: a. Discuss the accounting treatments for related assets, supported by detailed calculations for the following: i. Revaluation treatment for the year ended 2011 and 2014. ii. Impairment loss for the year ended 2017. iii. Reversal of impairment loss for the year ended 2019. b. Assuming there were no other transactions causing temporary tax differences, prepare journal entries for deferred tax arises from depreciable assets for the year ended 2010- 2013 (show supporting calculations)