Bauk Consumer Electrical Berbad, manufactures a variety of home electrical equipment in Malaysia. The following is...

 

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Bauk Consumer Electrical Berbad, manufactures a variety of home electrical equipment in Malaysia. The following is the Trial Balance of the company as at 31 December 2021: Debit Credit RM RM Sales Cost of sales 1,306,800 562,200 Selling and distribution expenses Administrative expenses 54,800 100,260 64,800 43,750 16,440 70,400 352,700 424,248 326,250 1,800,000 Interim Dividend Interest on loan Interest on debentures Тах рaid Inventories as at 31 December 2021 (at cost) Bank Intangible asset Land Building (at cost) Machinery (at cost) Motor vehicle (at cost) Accumulated Depreciation (31 December 2020): Building Machinery Motor vehicles 880,000 386,000 1,223,700 440,000 87.320 656,198 Receivables and Payables Allowance for Impairment of Trade Receivable Rental income 4.5% Bank loan 211,750 131,050 15,430 57,200 1,300,000 411,000 422,300 1,200,000 330,000 60,000 100,000 6,517,298 8% Debentures Retained profit as at 31 December 2020 Ordinary share capital 12% Preference shares capital General reserve Assets Revaluation Reserve as at 31 December 2020 6,517,298 You are given the following information: 1. The information related to the property, plant and equipment of the company is as follows: a. а. The depreciation policy of the company is as follows: Building Machinery Motor vehicles 5% on cost; yearly basis. 5% on reducing balance; yearly basis. 20% on reducing balance, monthly basis. |is not depreciated. Land Note: Depreciation on motor vehicles is treated as selling and distribution expenses while depreciation for other property, plant and equipment to be treated as administrative expenses. b. Throughout the year, the company had acquired the following assets: Assets Cost Financing method (RM) Purchase price 372,000 5% 6,420 Credit basis 5,190 Motor vehicles Trade discount Road tax & Insurance Cost of painting company's logo Cost of maintenance Purchase price Import duties Installation cost Transportation cost Training cost Date of acquisition: 26 March 2021 2,250 188,900 2,340 6,210 3,980 15,870 Machinery Cash basis Date of acquisition: 4 July 2021 The acquired machinery has an estimated residual value of RM15,800. On 29 September 2021, one of the vehicles costing RM88,700 involved in an accident and totally damaged. Company received RM22,000 from the insurance company as compensation. The vehicle was acquired on 11 July 2019. C. On 31 December 2021, the land was revalued to RM2,505,000 by a professional valuer. The management decided to incorporate the revalued amount in the company's book. d. Required: i. Explain the components of initial cost of purchase of property, plant and equipment in accordance with MFRS 116 property, plant and equipment. (3 marks) Compute the initial cost for the motor vehicles and machinery acquired by the ii. company during the year. (4 marks) i. Calculate the current year's depreciation charges for motor vehicles. (4 marks) Recommend the company on the accounting treatment on derecognition of the motor vehicle. iv. (5 marks) Advise the accounting treatment and the journal entries for the revaluation of land on 31 December 2021. v. (4 marks) (Total: 20 marks) Bauk Consumer Electrical Berbad, manufactures a variety of home electrical equipment in Malaysia. The following is the Trial Balance of the company as at 31 December 2021: Debit Credit RM RM Sales Cost of sales 1,306,800 562,200 Selling and distribution expenses Administrative expenses 54,800 100,260 64,800 43,750 16,440 70,400 352,700 424,248 326,250 1,800,000 Interim Dividend Interest on loan Interest on debentures Тах рaid Inventories as at 31 December 2021 (at cost) Bank Intangible asset Land Building (at cost) Machinery (at cost) Motor vehicle (at cost) Accumulated Depreciation (31 December 2020): Building Machinery Motor vehicles 880,000 386,000 1,223,700 440,000 87.320 656,198 Receivables and Payables Allowance for Impairment of Trade Receivable Rental income 4.5% Bank loan 211,750 131,050 15,430 57,200 1,300,000 411,000 422,300 1,200,000 330,000 60,000 100,000 6,517,298 8% Debentures Retained profit as at 31 December 2020 Ordinary share capital 12% Preference shares capital General reserve Assets Revaluation Reserve as at 31 December 2020 6,517,298 You are given the following information: 1. The information related to the property, plant and equipment of the company is as follows: a. а. The depreciation policy of the company is as follows: Building Machinery Motor vehicles 5% on cost; yearly basis. 5% on reducing balance; yearly basis. 20% on reducing balance, monthly basis. |is not depreciated. Land Note: Depreciation on motor vehicles is treated as selling and distribution expenses while depreciation for other property, plant and equipment to be treated as administrative expenses. b. Throughout the year, the company had acquired the following assets: Assets Cost Financing method (RM) Purchase price 372,000 5% 6,420 Credit basis 5,190 Motor vehicles Trade discount Road tax & Insurance Cost of painting company's logo Cost of maintenance Purchase price Import duties Installation cost Transportation cost Training cost Date of acquisition: 26 March 2021 2,250 188,900 2,340 6,210 3,980 15,870 Machinery Cash basis Date of acquisition: 4 July 2021 The acquired machinery has an estimated residual value of RM15,800. On 29 September 2021, one of the vehicles costing RM88,700 involved in an accident and totally damaged. Company received RM22,000 from the insurance company as compensation. The vehicle was acquired on 11 July 2019. C. On 31 December 2021, the land was revalued to RM2,505,000 by a professional valuer. The management decided to incorporate the revalued amount in the company's book. d. Required: i. Explain the components of initial cost of purchase of property, plant and equipment in accordance with MFRS 116 property, plant and equipment. (3 marks) Compute the initial cost for the motor vehicles and machinery acquired by the ii. company during the year. (4 marks) i. Calculate the current year's depreciation charges for motor vehicles. (4 marks) Recommend the company on the accounting treatment on derecognition of the motor vehicle. iv. (5 marks) Advise the accounting treatment and the journal entries for the revaluation of land on 31 December 2021. v. (4 marks) (Total: 20 marks)

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