Ariana Bhd is a pharmaceutical distributor which purchases prescription medicines and other medical products directly from pharmaceutical manufacturers and distribute across the country. During year 2020, Ariana Bhd has acquired three types of tangible non-current assets. The first non-current asset bought is a brand new machine that can facilitate medicines labelling process using the new technology, thus increase the capacity of distribution per day. The machine was bought on 15 April 2020 at a quoted price of RM4,000,000 on a term of 2/20, n/60. Ariana Bhd paid the machine in the discount period. In addition, the following expenditure incurred; Installation cost of RM150,000 and cost of storage for the machine of RM75,000 as it was delivered before the factory is ready for installation. Insurance of RM225,000 were incurred as the management seek to reduce the risk of fire. Out of this amount, 25% was meant to secure the machine while it still in transit. Expense incurred to test the functionality of the installation amounting to RM300,000. Maintenance contract for the machine sign–up for the next three years amounting to RM150,000. The machine incurred a transportation costs of RM120,000 to bring it to the factory. Staff training costs to handle the machine amounted to RM180,000. The second non-current asset acquired by Ariana Bhd is a two-storey building which to be used as its warehouse. The value of the building was uncertain because the building was in poor condition and also unique in its type. This building was bought on 31 May 2020 by issuing 50,000 units of shares to Nora Bhd. Market value for a unit of share at the date was RM3.50 per unit. The third non-current asset purchased by Ariana Bhd is a new van at the end of August 2020 from Qaisara Bhd. This new van was exchanged with its old van which was bought in January 2018 at a price of RM24,000. It was depreciated at RM2,000 every year and its fair value at the date of exchange was RM8,000. Ariana Bhd has the policy to fully depreciate its assets for a year if the holding of assets in the particular year is more than 6 months. The new van lists for RM32,000 and Qaisara Bhd offered a trade-in allowance of RM9,000 for the used van. This exchange has commercial substance. REQUIRED: In accordance with MFRS 116 Property, Plant, and Equipment, calculate the acquisition cost of the (i) machine, (ii) building, and (iii) van bought by Ariana Bhd. Prepare the journal entries to record the transactions for Ariana Bhd
Ariana Bhd is a pharmaceutical distributor which purchases prescription medicines and other medical products directly from pharmaceutical manufacturers and distribute across the country. During year 2020, Ariana Bhd has acquired three types of tangible non-current assets.
The first non-current asset bought is a brand new machine that can facilitate medicines labelling process using the new technology, thus increase the capacity of distribution per day. The machine was bought on 15 April 2020 at a quoted price of RM4,000,000 on a term of 2/20, n/60. Ariana Bhd paid the machine in the discount period. In addition, the following expenditure incurred;
- Installation cost of RM150,000 and cost of storage for the machine of RM75,000 as it was delivered before the factory is ready for installation.
- Insurance of RM225,000 were incurred as the management seek to reduce the risk of fire. Out of this amount, 25% was meant to secure the machine while it still in transit.
- Expense incurred to test the functionality of the installation amounting to RM300,000.
- Maintenance contract for the machine sign–up for the next three years amounting to RM150,000.
- The machine incurred a transportation costs of RM120,000 to bring it to the factory.
- Staff training costs to handle the machine amounted to RM180,000.
The second non-current asset acquired by Ariana Bhd is a two-storey building which to be used as its warehouse. The value of the building was uncertain because the building was in poor condition and also unique in its type. This building was bought on 31 May 2020 by issuing 50,000 units of shares to Nora Bhd. Market value for a unit of share at the date was RM3.50 per unit.
The third non-current asset purchased by Ariana Bhd is a new van at the end of August 2020 from Qaisara Bhd. This new van was exchanged with its old van which was bought in January 2018 at a price of RM24,000. It was depreciated at RM2,000 every year and its fair value at the date of exchange was RM8,000. Ariana Bhd has the policy to fully
REQUIRED:
In accordance with MFRS 116 Property, Plant, and Equipment, calculate the acquisition cost of the (i) machine, (ii) building, and (iii) van bought by Ariana Bhd. Prepare the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
