Innforest Bhd purchased 10 acres of land on 1 January 2011 to develop a project for...

   

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Innforest Bhd purchased 10 acres of land on 1 January 2011 to develop a project for tourism purposes. The project is known as Seri Banun Kampung Adat Melayu. It is a place to gather the custom and traditions of all Malay heritage such as Acheh, Banjar, Bugis, Jawa, Minangkabau as well as Malaysian culture in one stop centre. The fair value of 10 acres land was RM500,000. The 3 acres of land was reserved as a fruit orchard for special occasion and 1 acre was reserved for future undetermined used. The project is aimed to offer the visitors with the feel of experience to live, learn and taste the foods serves in a traditional way of old 'bangsa melayu' during their stay. The 'kampung' environment also provide the ambience of old Malay times to be enjoyed by the visitors. The visitors will be served with a traditional food cooked nicely in a traditional way during their stay in the village. Then, the foods will be sent to the visitor houses and they can have it like the old Malays do. Normally, the visitors will allow to come by booking the slot in advance and in a minimum of 10 peoples in a group. No walk-in visits are allowed. Usually, more visitors would come during fruit seasons as compared to other months of the year to experience the fruit picking activities including collection of durians. Inap Desa village style The project started in year 2011, where Innforest Bhd made an investment to build forty (40) village houses with a different theme of 'bangsa melayu' costing RM50,000 each and 1 cook house amounting RM100,000. The borrowings applied of RM2,500,000 four-year term loan from Public Islamic Bank on 1 February 2011 to finance the construction of the houses. On 1 May 2011, the bank approved only RM2,000,000 loan which carried an interest rate of 5% per annum. The construction of the houses commenced in July 2011 and it took three years to complete. Once completed, the houses are operated as homestay (36 units), pickles and fruit jam lab (1 unit), Malay craft demonstration house (1 unit), massage parlour house (1 unit) and cook house (1 unit). One of the village houses was rented out to Pak Abu for his show to demonstrate on making Malay craft by using Malay carpentry tools such as beliung, pahat and kikir. The craft items made by Pak Abu is available for sale to the visitors. Pak Abu paid RM500 for the monthly rental. Balai Rung Seri @ Village Hall Balai Rung Seri which is used as a proud communal function by old Malays was also erected on the same date with the project started. The Balai Rung Seri was sponsored by Badan Kebudayaan Negeri amounting RM100,000. The grant was awarded based on the active involvement of Innforest Bhd in the country's tourism industry and tourism activities for the past several years. The total cost incurred for the Balai Rung Seri was RM200,000. LUMOS Auro Projector facilities Starting year 2021, Innforest Bhd has initiated a wayang pacak for all the visitors to replace the performance of wayang kulit. This is to light up and make the night merrier. The facilities for wayang pacak used 100% Lumos Ray Home cinema purchased from a dealer based in Singapore. The whole package was SGD 6,000. At the date of acquisition, 1 January 2021, the spot rate was RM3: SGD1. As at 31 December 2021, the rate was RM4: SGD1. Only a quarter of payment for the equipment has not yet been made. The LUMOS Auro Projector provides an immersive movie theatre experience with a large screen, Dolby surround sound system with affordable, super clear and easy to use that can satisfy the visitors. Pickles and Fruit Jam Lab During the fruit season, pickles and fruit jam will be produce in the village. The special machine was purchased amounting RM150,000 for cleaning, crushing, chopping and pasteurizing the fruits. 10 workers were hired to work in the lab. Below were the expenses incurred in making the pickles and fruit jam per season: Variety of fruit pick from the orchard Sugars, salt and vinegar Jars with metal caps Labelling and packaging Workers' wages RM 200,000 10,000 50,000 15,000 20,000 The pickles and fruit jam process has undergone research and development in order to get the taste that can satisfy the expectation of eatery. The taste of pickles and fruit jam produce in the lab was satisfactory and was sold out each time it is made. The selling price is RM30 per jar. For each production, 1000 jars of pickles and fruit jam were produced. However, 500 jars of fruit jam were damaged due to overheat during the process in June 2021. Massage Parlour House Not forgetting to introduce the various type of traditional massage to the visitors, 10 professional masseurs who specialized in different types of massage were employed by Innforest Bhd to work in the parlour. They were sent for training from time to time in order to ensure that they were able to give the best service to the visitors. Innforest Bhd paid RM50,000 for workers training skills fees each time they go for training. The company had capitalized the training skills expenditure as an intangible asset. Accounting Policy Innforest Bhd adopts revaluation/fair value model to record its non-current assets. The grant is treated as related to asset method. The depreciation is using straight line method. The useful life of assets are as follows: Houses: 20 years with major maintenance every 5 years. Machine 10 years with major overhaul every 5 years. The financial year end is on 31 December every year. 3. Discuss the classification and the measurement of the houses. (4 marks) 4. Discuss the classification and presentation in the financial statement for the house rented by Pak Abu. (6 marks) Innforest Bhd purchased 10 acres of land on 1 January 2011 to develop a project for tourism purposes. The project is known as Seri Banun Kampung Adat Melayu. It is a place to gather the custom and traditions of all Malay heritage such as Acheh, Banjar, Bugis, Jawa, Minangkabau as well as Malaysian culture in one stop centre. The fair value of 10 acres land was RM500,000. The 3 acres of land was reserved as a fruit orchard for special occasion and 1 acre was reserved for future undetermined used. The project is aimed to offer the visitors with the feel of experience to live, learn and taste the foods serves in a traditional way of old 'bangsa melayu' during their stay. The 'kampung' environment also provide the ambience of old Malay times to be enjoyed by the visitors. The visitors will be served with a traditional food cooked nicely in a traditional way during their stay in the village. Then, the foods will be sent to the visitor houses and they can have it like the old Malays do. Normally, the visitors will allow to come by booking the slot in advance and in a minimum of 10 peoples in a group. No walk-in visits are allowed. Usually, more visitors would come during fruit seasons as compared to other months of the year to experience the fruit picking activities including collection of durians. Inap Desa village style The project started in year 2011, where Innforest Bhd made an investment to build forty (40) village houses with a different theme of 'bangsa melayu' costing RM50,000 each and 1 cook house amounting RM100,000. The borrowings applied of RM2,500,000 four-year term loan from Public Islamic Bank on 1 February 2011 to finance the construction of the houses. On 1 May 2011, the bank approved only RM2,000,000 loan which carried an interest rate of 5% per annum. The construction of the houses commenced in July 2011 and it took three years to complete. Once completed, the houses are operated as homestay (36 units), pickles and fruit jam lab (1 unit), Malay craft demonstration house (1 unit), massage parlour house (1 unit) and cook house (1 unit). One of the village houses was rented out to Pak Abu for his show to demonstrate on making Malay craft by using Malay carpentry tools such as beliung, pahat and kikir. The craft items made by Pak Abu is available for sale to the visitors. Pak Abu paid RM500 for the monthly rental. Balai Rung Seri @ Village Hall Balai Rung Seri which is used as a proud communal function by old Malays was also erected on the same date with the project started. The Balai Rung Seri was sponsored by Badan Kebudayaan Negeri amounting RM100,000. The grant was awarded based on the active involvement of Innforest Bhd in the country's tourism industry and tourism activities for the past several years. The total cost incurred for the Balai Rung Seri was RM200,000. LUMOS Auro Projector facilities Starting year 2021, Innforest Bhd has initiated a wayang pacak for all the visitors to replace the performance of wayang kulit. This is to light up and make the night merrier. The facilities for wayang pacak used 100% Lumos Ray Home cinema purchased from a dealer based in Singapore. The whole package was SGD 6,000. At the date of acquisition, 1 January 2021, the spot rate was RM3: SGD1. As at 31 December 2021, the rate was RM4: SGD1. Only a quarter of payment for the equipment has not yet been made. The LUMOS Auro Projector provides an immersive movie theatre experience with a large screen, Dolby surround sound system with affordable, super clear and easy to use that can satisfy the visitors. Pickles and Fruit Jam Lab During the fruit season, pickles and fruit jam will be produce in the village. The special machine was purchased amounting RM150,000 for cleaning, crushing, chopping and pasteurizing the fruits. 10 workers were hired to work in the lab. Below were the expenses incurred in making the pickles and fruit jam per season: Variety of fruit pick from the orchard Sugars, salt and vinegar Jars with metal caps Labelling and packaging Workers' wages RM 200,000 10,000 50,000 15,000 20,000 The pickles and fruit jam process has undergone research and development in order to get the taste that can satisfy the expectation of eatery. The taste of pickles and fruit jam produce in the lab was satisfactory and was sold out each time it is made. The selling price is RM30 per jar. For each production, 1000 jars of pickles and fruit jam were produced. However, 500 jars of fruit jam were damaged due to overheat during the process in June 2021. Massage Parlour House Not forgetting to introduce the various type of traditional massage to the visitors, 10 professional masseurs who specialized in different types of massage were employed by Innforest Bhd to work in the parlour. They were sent for training from time to time in order to ensure that they were able to give the best service to the visitors. Innforest Bhd paid RM50,000 for workers training skills fees each time they go for training. The company had capitalized the training skills expenditure as an intangible asset. Accounting Policy Innforest Bhd adopts revaluation/fair value model to record its non-current assets. The grant is treated as related to asset method. The depreciation is using straight line method. The useful life of assets are as follows: Houses: 20 years with major maintenance every 5 years. Machine 10 years with major overhaul every 5 years. The financial year end is on 31 December every year. 3. Discuss the classification and the measurement of the houses. (4 marks) 4. Discuss the classification and presentation in the financial statement for the house rented by Pak Abu. (6 marks)

Answer rating: 100% (QA)

1 Classification of the houses The houses are classified as property plant and equipment PPE PPE is defined as tangible assets that are held by an entity for use in the production of goods or services ... View the full answer