Revision Question Financial Reporting Standard 2013
Question 1(a)
Hilux Sdn Bhd imported a machinery to be used in its factory. The costs incurred were:
Invoice price of machinery 500,000
Insurance on shipment 200,000
Import duties and taxes 50,000
Delivery costs 70,000
Installation charges 10,000
Dismantling and restoring the building site 30,000
General administrative cost 20,000
Operating losses before commercial production 50,000
Interest charges paid to supplier of plant for deferred credit 2,000
Consultants used for advice on acquisition of the machinery 6,000
Required:
Please advise Hilux Sdn Bhd on the costs that can be capitalized in accordance with FRS116. ( 5 marks)
Question 1(b)
Luxury Cruise operates a low- cost air transport system. One of its airplanes was acquired on 1 January 2010 for a total cost of RM800 million. The plane’s cost components are as follows:
Component Cost (RM Million) Useful life
Engine 110 5 years
Body 400 10 years
Furniture and fittings 150 6 years
On 1 January 2012, it was discovered that there was an unexpected level of engine trouble and the company decided to replace the engine with a new engine at a cost of RM150 million. The expected life of the new engine was determined to be 8 years.
At the same time the company did a limited upgrade to its furniture and fittings at a cost of RM90 million. The remaining life of the furniture and fitting was revised to 8 years as at 1 January 2012.
Required:
Calculate the depreciation charge for the year ended 31 December 2012 and disclose the carrying amount of the airplanes on the stated date. (20 Marks)
Question 2(a)
Universal Builders Inc. is well known for its expertise in building flyovers and maintaining these structures. Impressed with Universal’s track record,
Hilux Sdn Bhd imported a machinery to be used in its factory. The costs incurred were:
Invoice price of machinery 500,000
Insurance on shipment 200,000
Import duties and taxes 50,000
Delivery costs 70,000
Installation charges 10,000
Dismantling and restoring the building site 30,000
General administrative cost 20,000
Operating losses before commercial production 50,000
Interest charges paid to supplier of plant for deferred credit 2,000
Consultants used for advice on acquisition of the machinery 6,000
Required:
Please advise Hilux Sdn Bhd on the costs that can be capitalized in accordance with FRS116. ( 5 marks)
Question 1(b)
Luxury Cruise operates a low- cost air transport system. One of its airplanes was acquired on 1 January 2010 for a total cost of RM800 million. The plane’s cost components are as follows:
Component Cost (RM Million) Useful life
Engine 110 5 years
Body 400 10 years
Furniture and fittings 150 6 years
On 1 January 2012, it was discovered that there was an unexpected level of engine trouble and the company decided to replace the engine with a new engine at a cost of RM150 million. The expected life of the new engine was determined to be 8 years.
At the same time the company did a limited upgrade to its furniture and fittings at a cost of RM90 million. The remaining life of the furniture and fitting was revised to 8 years as at 1 January 2012.
Required:
Calculate the depreciation charge for the year ended 31 December 2012 and disclose the carrying amount of the airplanes on the stated date. (20 Marks)
Question 2(a)
Universal Builders Inc. is well known for its expertise in building flyovers and maintaining these structures. Impressed with Universal’s track record,