An entity, whose functional currency is the RM, purchases machinery from a foreign supplier for SD$8 million

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Question:

An entity, whose functional currency is the RM, purchases machinery from a foreign supplier for SD$8 million on 31 October 2019 when the exchange rate was SD$1.60 : RM1. At the year-end of 31 December 2019, the amount has not been paid. The closing exchange rate was SD$1.25 : RM1.

Which of the following statements are correct?

Cost of plant RM6,400,000, no exchange gain, other payable RM6,400,000.

Cost of plant RM5,000,000, exchange loss RM1,400,000, other payable RM6,400,000.

Cost of plant RM6,400,000, exchange gain RM1,400,000, other payable RM5,000,000.

Cost of plant RM5,000,000, no exchange loss, other payable RM5,000,000.

Illustrate journal entry for the above transaction as at 31 December 2019.

Debit loss in foreign exchange RM1,400,000; credit other payable RM1,400,000

Debit other payable RM1,400,000; credit gain in foreign exchange RM1,400,000

Debit other payable RM1,400,000; credit plant RM1,400,000

Debit plant RM1,400,000; credit other payable RM1,400,000

Which of the following terms are defined by the statement: “The currency of the primary economic environment in which the entity operates”?

Local currency

Operational currency

Functional currency

Presentation currency

The following scenario relates to questions 4-6

Warta Sinar Bhd owns a manufacturing plant in Klang. The carrying amount of the manufacturing plant on 1 January 2019 is RM820,000,000. On 1 April 2019, the Board of Warta Sinar Bhd approves a plan to sell the manufacturing plant. The management has initiated an active programmed to sell the property and found a buyer with a firm commitment to buy the manufacturing plant. The buyer is willing to pay at the fair value of RM600,000,000. Carrying amount of the manufacturing plant’s as at that date is RM856,700,000. The costs of disposal are estimated at RM1,500,000.

Question 4

4. Under which circumstances shall an entity classify a non-current asset as held for sale?

If its carrying amount will be recovered principally through continuing use rather than through a sale.

If its carrying amount exceeds its market price.

If its carrying amount will be recovered principally through a sale transaction rather than through continuing use.

If its sale price exceeds its carrying amount.

Question 5

Upon classifying the manufacturing plant as held for sale and in applying the measurement basis prescribed by MFRS 5, Warta Sinar Bhd may need to recognize an impairment loss for write-down of the asset, if any. Calculate the impairment loss.

RM220,000,000

RM256,700,000

RM258,200,000

RM221,500,000

Question 6:

MFRS 5 provides unconditional requirement that the sale of the non-current asset held for sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

True

False