Darusan Bhd has the Malaysian Ringgit as its functional currency and 31 December as its financial year end. On 1 February 20x5, it buys a building in Kuwait for KWD7,000,000 cash. The useful life of the building is estimated to be 10 years. Darusan Bhd uses the cost model for all its property, plant and equipment and the straight-line method for depreciation. A full year's depreciation is charged in the year of purchase and none in the year of disposal. The spot exchange rates are as follows: 1 February 20x5 KWD1 = RM13.20 31 December 20x5 KWD1 = RM13.25 Required: (a) Show how you would recognize the building on 1 February 20x5 and 31 December 20x5 in the books of Darusan Bhd. (b) Explain the treatment of the depreciation of the building.

Darusan Bhd has the Malaysian Ringgit as its functional currency and 31 December as its financial year end. On 1 February 20x5, it buys a building in Kuwait for KWD7,000,000 cash. The useful life of the building is estimated to be 10 years. Darusan Bhd uses the cost model for all its property, plant and equipment and the straight-line method for depreciation. A full year's depreciation is charged in the year of purchase and none in the year of disposal. The spot exchange rates are as follows: 1 February 20x5 KWD1 = RM13.20 31 December 20x5 KWD1 = RM13.25 Required: (a) Show how you would recognize the building on 1 February 20x5 and 31 December 20x5 in the books of Darusan Bhd. (b) Explain the treatment of the depreciation of the building.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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