Bio Beauty Bhd (BB) is a Malaysian company, established in 2010. It sells range of cosmetic...

 

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Bio Beauty Bhd (BB) is a Malaysian company, established in 2010. It sells range of cosmetic products for customers in Malaysia and South-East Asian countries. Since its inception, BB has been very successful. With the increasing orders received by a company, BB has prepared a land site to construct a new warehouse for the company's operation. BB bought a three-acre land with and old factory building in the year 2019 at the price of RM500,000. BB paid RM2,000 for real estate taxes and RM1,500 real estate agent commission fees. The land ownership transfer was just completed and an additional cost of RM30,000 was incurred for clearing the site. BB received RM8,000 from the residual value of demolished the old building. In order to ensure the safety of the property, BB incurred a cost totalled RM20,000 for installation of fences around the property. The plan has been arranged accordingly to ensure that the warehouse could be constructed as soon as the site was ready. However, the loan applied from CNN Bank was rejected and all related construction activities had to be temporarily suspended. BB then made a new loan application with BNN Bank. While waiting for the loan approval, the management team of BB decided to utilize the site to generate additional income for the company. The site was rented out for car boot sales activities in the morning and food truck operation at night. In the first month of operation, BB earned RM80,000 related to rental service revenue and the related costs included RM4,800 for staff salary, RM2,200 for administration expense and RM3,000 for other expenses. After one month of operation, the bank loan was approved and BB immediately stopped the site renting operation and continued with its initial intention to construct the warehouse. The total cost to construct the warehouse, from excavation until completion, was RM880,000 RM3,200 cost of inefficiencies caused by a labour strike). This cost excluded the revenue and expenses related to the site rental operation. Since the rental revenue and expenses were incurred on the construction site, Mrs. Tara, the accountant of BB was uncertain whether to include these revenue and expenses to the cost of land or cost of the constructed warehouse. (including You are required to: (a) Analyse the problem(s) faced by BB by referring to the MFRS 116 Property, Plant and Equipment (Hint: Find the related paragraph in the standard). (CTPS Question -Problem analysis) (b) Help the accountant of BB to make a decision related to the above issue(s) (CTPS Question - Generation of solution, evaluation and decision making). Bio Beauty Bhd (BB) is a Malaysian company, established in 2010. It sells range of cosmetic products for customers in Malaysia and South-East Asian countries. Since its inception, BB has been very successful. With the increasing orders received by a company, BB has prepared a land site to construct a new warehouse for the company's operation. BB bought a three-acre land with and old factory building in the year 2019 at the price of RM500,000. BB paid RM2,000 for real estate taxes and RM1,500 real estate agent commission fees. The land ownership transfer was just completed and an additional cost of RM30,000 was incurred for clearing the site. BB received RM8,000 from the residual value of demolished the old building. In order to ensure the safety of the property, BB incurred a cost totalled RM20,000 for installation of fences around the property. The plan has been arranged accordingly to ensure that the warehouse could be constructed as soon as the site was ready. However, the loan applied from CNN Bank was rejected and all related construction activities had to be temporarily suspended. BB then made a new loan application with BNN Bank. While waiting for the loan approval, the management team of BB decided to utilize the site to generate additional income for the company. The site was rented out for car boot sales activities in the morning and food truck operation at night. In the first month of operation, BB earned RM80,000 related to rental service revenue and the related costs included RM4,800 for staff salary, RM2,200 for administration expense and RM3,000 for other expenses. After one month of operation, the bank loan was approved and BB immediately stopped the site renting operation and continued with its initial intention to construct the warehouse. The total cost to construct the warehouse, from excavation until completion, was RM880,000 RM3,200 cost of inefficiencies caused by a labour strike). This cost excluded the revenue and expenses related to the site rental operation. Since the rental revenue and expenses were incurred on the construction site, Mrs. Tara, the accountant of BB was uncertain whether to include these revenue and expenses to the cost of land or cost of the constructed warehouse. (including You are required to: (a) Analyse the problem(s) faced by BB by referring to the MFRS 116 Property, Plant and Equipment (Hint: Find the related paragraph in the standard). (CTPS Question -Problem analysis) (b) Help the accountant of BB to make a decision related to the above issue(s) (CTPS Question - Generation of solution, evaluation and decision making).

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The main issues which are faced by the Accountant of Bio Beauty Bhd BB Whether to include the revenues and expenses which are generated through the re... View the full answer