Melawati Corporation Bhd (MCB) acquired an office building (old building) on 1 January 2005 for RM4,000,000. It

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Question:

Melawati Corporation Bhd (MCB) acquired an office building (old building) on 1 January 2005 for RM4,000,000. It depreciates the building on the straight-line method over 50 years to a nil residual value.

On 1 January 2014, the company had acquired the following new properties:

Description	Business purpose	RM'000
Factory A	Held to earn lease rentals and for capital appreciation	1,500
Factory B	Held to earn lease rentals and for capital appreciation	9,000
Office A	Held to earn lease rentals and for capital appreciation	7,000

Within a few months after acquisition the above properties, the company managed to lease the properties to third parties as follows:

		Rent/month
Description	Tenure period (years)	RM'000
Factory A	10	20
Factory B	15	40
Office A	15	35

No change is the fair value of the property during the year ended 31 December 2014.

On 1 January 2015, the company had acquired the following new properties:

Description	Business purpose	RM'000
Land A (Vacant)	To build a building for own occupation	4,000
Land B (Vacant)	Held to earn lease rentals and for capital appreciation	1,000
Land C (Vacant)	Held to earn lease rentals and for capital appreciation	2,000
		24,500

On 30 June 2015, in response to an unsolicited offer, the company disposed of Factory B for RM9,100,000.

On 1 October 2015, when the fair value of Land B was RM1,050,000, the company changed the purpose for which it holds Land B. It immediately began to develop Land B as a residential housing estate for sale in the ordinary course of business.

On 12 October 2015, the company was granted planning permission, at a cost of RM500,000, for the development of an office block on Land C. MCB intends to use the office block to earn lease rentals from independent third parties and for capital appreciation.

On 16 December 2015, the company enter into a contract with Era Dimension Bhd (an independent third party) to construct the office block. The RM10,000,000 fixed price contract provides that the construction commence by 30 June 2016 and be completed by 30 June 2018.

On 31 December 2015, the company acquired an office building - Office building B for RM3,000,000 and the company’s administrative staff immediately occupied the building. It depreciates the building on the straight-line method over 50 years to a nil residual value.

At 31 December 2015, for the first time since incorporation, the company employed an independent valuer who holds a recognised and relevant professional qualification and who has recent experience in the location and category of the property being valued to estimate the fair value of the company’s properties. The valuer assessed the fair value of the property with reference to recent arm’s length sales prices of similar properties in the same area, adjusted for changes in market conditions since the sales transactions and for differences between the properties sold and the company’s property. The valuation report on the fair value of the company’s properties as at 31 December 2015 is as follows:

	Fair value
Description	RM'000
Old building	5,000
Factory building A	1,700
Office building A	7,500
Office building B	3,000
Land A (vacant)	4,500
Land B (buildings under construction)	2,200
Land C (vacant)	3,000

MCB measures property plant and equipment and investment property using revaluation model and fair value model respectively.

Required:

Draft extract financial statement of Melawati Corporation Bhd (the company) for the year ended 31 December 2015 showing the following information:

1) Statement of financial position, showing carrying value of property, plant and equipment

2)Statement of profit or loss and other comprehensive income, showing rental income, depreciation expenses, and fair value gain on changes of investment property and gain or loss on disposal of property and revaluation surplus on property’s valuation.

3)Significant accounting policies adopted by the company for property plant and equipment and investment property.

4)Notes to the accounts to present and disclose the movement of property plant and equipment and investment property in accordance with approved accounting standards and regulations in Malaysia.