(a)Four years ago, Sungai Way Berhad acquired a computer-controlled milling machine to use in its medical device manufacturing operations at a cost of $5,000,000. The firm expected the machine to have an eight-year useful life and zero salvage value. The company has been using straight-line depreciation for the asset. Due to the rapid rate of technological change in the industry, at the end of Year 5. Sungai Way estimates that the machine is capable of generating (undiscounted) future cash flows of $1,500,000. Based on the quoted market prices of similar assets. Sungai Way estimates the machine to have a fair value of $1,200,000. Required: (i)Compute the book value of the machine at the end of Year 5. (2.5 marks) (ii)Describe whether Sungai Way should or should not recognize an impairment of this asset? Why or why not? If yes, what is the amount of the impairment loss that should be recognised? (2.5 marks) (iii)At the end of Year 5, calculate the amount which should be recorded for the machine in Sungai Ways balance sheet? (2.5 marks) (iv)Distinguish what would your answer to requirement (ii) have been if Sungai Ways estimate of the machines (undiscounted) future cash flows was $2,000,000? (2.5 marks) (b)The following information pertains to a bond issue of UTP Berhad: Maturity value: $1,000,000 Maturity date: January 1, 2023 Coupon interest rate: 8% Interest payments made annually on December 31st Date of issue: January 1, 2018 Effective (market) interest rate: 10% Required: (i)Indicate at what price were the bonds issued? (2 marks) (ii)Using the effective interest rate method, prepare an amortisation schedule showing the annual interest expense, annual discount or premium amortisation, and carry value through December 31, 2020. (3 marks) (iii)Show the necessary journal entries on January 1, 2018 and December 31, 2019. (3 marks) (iv)Show how should the bonds be shown on UTPs December 31, 2018 balance sheet? (2 marks)

Answer rating: 100% (QA)

a i Straight line depreciation is calculated as follows Depreciable base Cost Salvage Value 5000000 0 5000000 Annual Depreciation Expense Depreciable Base Useful Life 5000000 8 years 625000 per year B... View the full answer