The details of property, plant and equipment for Harmoni Bhd is as follows: Cost (RM) Useful...

  

Transcribed Image Text:

The details of property, plant and equipment for Harmoni Bhd is as follows: Cost (RM) Useful life Acquisition date Assets Land Building Machine Equipment Motor vehicle 20 February 2017 1 January 2018 1 January 2017 1 January 2018 1 June 2018 30 April 2,200,000 1,800,000 31 July 900,000 850,000 230,000 Indefinite 50 years 20 years 16 years 10 years Residual (RM) nil Harmoni Bhd uses the straight-line depreciation method for all depreciable assets. The company adopts the revaluation model for land and buildings use in the business, the cost model for equipment and motor vehicle and fair value model for investment property. The policy of Harmoni Bhd is to revalue its land and building annually. 100,000 50,000 30,000 20,000 The following information may have affected the property, plant and equipment during 2019: 1 January The estimated residual value of machine is revised to RM70,000 and the useful life is revised to a total of 18 years. A new truck was acquired for RM150,000. Its expected useful life is 8 years with a residual value of RM15,000. The company also paid RM1,000 for painting and lettering upon acquisition of the truck. Motor vehicle was traded in with a new motor vehicle. The market value of the new motor vehicle was RM300,000 and has a residual value of RM30,000 with 12 years of useful life. The cash paid during the transaction was RM80,000. 31 December The straight line basis is considered not appropriate for equipment because the rate of usage and the decline in value is much faster in the earlier part of its useful life. The declining balance method, at a rate of 20% per annum for the remaining useful life, is considered the more appropriate method. 31 December The fair value of land is RM2,650,000. It was revalued at RM2,300,000 and RM2,150,000 on 31 December 2017 and 31 December 2018 respectively. 31 December The company decided to rent out the building after use in the business for two years. The market value of the building at the end of 2018 and 2019 was RM2,000,000 and RM2,500,000 respectively. Required: a) Prepare journal entries to record the above transactions, including the depreciation expenses on 31 December 2019 (if applicable). Show all workings. b) (21 marks) Prepare an extract of the Statement of Financial Position for Harmoni Bhd as at 31 December 2019. (6 marks) c) Briefly explain THREE (3) differences between the fair value model and the revaluation model. (3 marks) The details of property, plant and equipment for Harmoni Bhd is as follows: Cost (RM) Useful life Acquisition date Assets Land Building Machine Equipment Motor vehicle 20 February 2017 1 January 2018 1 January 2017 1 January 2018 1 June 2018 30 April 2,200,000 1,800,000 31 July 900,000 850,000 230,000 Indefinite 50 years 20 years 16 years 10 years Residual (RM) nil Harmoni Bhd uses the straight-line depreciation method for all depreciable assets. The company adopts the revaluation model for land and buildings use in the business, the cost model for equipment and motor vehicle and fair value model for investment property. The policy of Harmoni Bhd is to revalue its land and building annually. 100,000 50,000 30,000 20,000 The following information may have affected the property, plant and equipment during 2019: 1 January The estimated residual value of machine is revised to RM70,000 and the useful life is revised to a total of 18 years. A new truck was acquired for RM150,000. Its expected useful life is 8 years with a residual value of RM15,000. The company also paid RM1,000 for painting and lettering upon acquisition of the truck. Motor vehicle was traded in with a new motor vehicle. The market value of the new motor vehicle was RM300,000 and has a residual value of RM30,000 with 12 years of useful life. The cash paid during the transaction was RM80,000. 31 December The straight line basis is considered not appropriate for equipment because the rate of usage and the decline in value is much faster in the earlier part of its useful life. The declining balance method, at a rate of 20% per annum for the remaining useful life, is considered the more appropriate method. 31 December The fair value of land is RM2,650,000. It was revalued at RM2,300,000 and RM2,150,000 on 31 December 2017 and 31 December 2018 respectively. 31 December The company decided to rent out the building after use in the business for two years. The market value of the building at the end of 2018 and 2019 was RM2,000,000 and RM2,500,000 respectively. Required: a) Prepare journal entries to record the above transactions, including the depreciation expenses on 31 December 2019 (if applicable). Show all workings. b) (21 marks) Prepare an extract of the Statement of Financial Position for Harmoni Bhd as at 31 December 2019. (6 marks) c) Briefly explain THREE (3) differences between the fair value model and the revaluation model. (3 marks)

Answer rating: 100% (QA)

Revaluation model Revaluation model is prescribed as an option under IAS 16 Property Plant and Equip... View the full answer