Rose Megah Bhd. (RMB) acquired a property on 1 January 2021 which RMB intends to sell....

 

Transcribed Image Text:

Rose Megah Bhd. (RMB) acquired a property on 1 January 2021 which RMB intends to sell. The property was obtained through auction. The property was valued at RM5 million. The property was in a deteriorated condition and repairs were a necessity. RMB intended to complete the repairs before selling the property. As of 31 December 2021, the fair value of the property was RM5.5 million. Total repair costs amounted to RM200,000 and the repairs were completed on 31 January 2022. The property was later sold for RM6 million on 30 September 2022. Depreciation for a similar type of property is at 10% per annum. In addition, RMB bought an antique car - Mr. Bean's Car, for RM100,000 in May 2022. The car was sold for RM200,000 in July 2022. Another set of antique cars was purchased in September for RM300,000. Refurbishment of the car costs RM20,000. RMB actively advertised the cars in local newspapers and social media. As of 31 December 2022, these cars were valued at RM350,000. Required: a) Discuss with examples TWO (2) indicators that may require an entity to reduce the value of their assets under MFRS136 Impairment of Assets. (4 marks) b) Based on the above, discuss how you would account for the property and the cars using an appropriate approved accounting standard. Justify your answers. Rose Megah Bhd. (RMB) acquired a property on 1 January 2021 which RMB intends to sell. The property was obtained through auction. The property was valued at RM5 million. The property was in a deteriorated condition and repairs were a necessity. RMB intended to complete the repairs before selling the property. As of 31 December 2021, the fair value of the property was RM5.5 million. Total repair costs amounted to RM200,000 and the repairs were completed on 31 January 2022. The property was later sold for RM6 million on 30 September 2022. Depreciation for a similar type of property is at 10% per annum. In addition, RMB bought an antique car - Mr. Bean's Car, for RM100,000 in May 2022. The car was sold for RM200,000 in July 2022. Another set of antique cars was purchased in September for RM300,000. Refurbishment of the car costs RM20,000. RMB actively advertised the cars in local newspapers and social media. As of 31 December 2022, these cars were valued at RM350,000. Required: a) Discuss with examples TWO (2) indicators that may require an entity to reduce the value of their assets under MFRS136 Impairment of Assets. (4 marks) b) Based on the above, discuss how you would account for the property and the cars using an appropriate approved accounting standard. Justify your answers.