On 1 June 2016, Megah Berhad acquired a piece of property for RM100 million through a...

 

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On 1" June 2016, Megah Berhad acquired a piece of property for RM100 million through a bargain purchase. The property, which consisted of a piece of land and 3 blocks of 2-storey shop lot building, has the market value of RM80 million and RM40 million respectively. The building. which covers only one quarter of the land, were half vacated as a warehouse, training center and employee's residential. The future use of the remaining land was not decided at the time of acquisition. The building estimated useful life is 20 years. The company adopted cost model for building. At the end of May 2017, since one of the company main business is as developer for residential area, the company has decided to develop more shop lots on the land to be sold along with one of the vacant block. The fair value of the land the time was 88 million and the block was valued at 12 million per block. The development is expected to begin next year. However, on June 2018, it was forecasted that the price for houses and shops will drop tremendously due to oversupply for the next 15 years. Due to this, the company has decided to hold the land for capital appreciation and expected to be sold in three years. The vacant block meanwhile, is leased to a third party. The fair value of the land and building blocks were RM90 million and 10 million per block respectively. REQUIRED: a. Briefly discuss the standards (MFRS) that were applicable to land and building throughout the year 2016 - 2018. 15 marks] b. Prepare journal entries to record all transactions related to the properties. On 1" June 2016, Megah Berhad acquired a piece of property for RM100 million through a bargain purchase. The property, which consisted of a piece of land and 3 blocks of 2-storey shop lot building, has the market value of RM80 million and RM40 million respectively. The building. which covers only one quarter of the land, were half vacated as a warehouse, training center and employee's residential. The future use of the remaining land was not decided at the time of acquisition. The building estimated useful life is 20 years. The company adopted cost model for building. At the end of May 2017, since one of the company main business is as developer for residential area, the company has decided to develop more shop lots on the land to be sold along with one of the vacant block. The fair value of the land the time was 88 million and the block was valued at 12 million per block. The development is expected to begin next year. However, on June 2018, it was forecasted that the price for houses and shops will drop tremendously due to oversupply for the next 15 years. Due to this, the company has decided to hold the land for capital appreciation and expected to be sold in three years. The vacant block meanwhile, is leased to a third party. The fair value of the land and building blocks were RM90 million and 10 million per block respectively. REQUIRED: a. Briefly discuss the standards (MFRS) that were applicable to land and building throughout the year 2016 - 2018. 15 marks] b. Prepare journal entries to record all transactions related to the properties.