Terrar Bhd is a company engaged in trading of motor vehicles. With increasing orders received by the company since its incorporation, Terrar Bhd is optimistic of a better sales growth in the future. The company closes its account on every 31 December. In order to meet customers’ demand for its product, the company acquired the plant assets of Cosmic Sdn Bhd on 2 March 2013. The plant assets consist of: Cost (RM) Land 3,200,000 Building 4,500,000 Warehouse 600,000 Terrar Bhd also incurred the following expenditure in cash between 15 March and 15 May 2013: Ordinary repairs to the building RM 17,000 Additions to the building RM 300,000 The building was estimated to have useful life of 10 years with no residual value. The company used straight-line depreciation method for building and the company policy is to recognise depreciation to the nearest whole year where assets acquired during the first six-month are considered held for the entire year while assets acquired during the last six-month are not considered in the depreciation computation. In early 2016, the company replaced the marble floor with wooden floor and the cost was RM150,000 which extends the estimated life of the building by two years. At the end of 2017, the building was revalued at RM4,200,000 by the qualified appraisal agent. On 30 December 2018, ¼ of the building was sold to TK Sdn. Bhd. for cash consideration of RM1,500,000 Prepare the journal entries to record the expenditure incurred subsequent to the acquisition of building in 2013 and determine the new cost of the building. Compute the new annual depreciation for the building after the replacement cost of wooden floor made in 2016. (CTPS) Prepare the journal entries to record the revaluation of the building at the end of 2017.
Terrar Bhd is a company engaged in trading of motor vehicles. With increasing orders received by the company since its incorporation, Terrar Bhd is optimistic of a better sales growth in the future. The company closes its account on every 31 December.
In order to meet customers’ demand for its product, the company acquired the plant assets of Cosmic Sdn Bhd on 2 March 2013. The plant assets consist of:
Cost (RM)
Land 3,200,000
Building 4,500,000
Warehouse 600,000
Terrar Bhd also incurred the following expenditure in cash between 15 March and 15 May 2013:
Ordinary repairs to the building RM 17,000
Additions to the building RM 300,000
The building was estimated to have useful life of 10 years with no residual value. The company used
In early 2016, the company replaced the marble floor with wooden floor and the cost was RM150,000 which extends the estimated life of the building by two years. At the end of 2017, the building was revalued at RM4,200,000 by the qualified appraisal agent. On 30 December 2018, ¼ of the building was sold to TK Sdn. Bhd. for cash consideration of RM1,500,000
- Prepare the
journal entries to record the expenditure incurred subsequent to the acquisition of building in 2013 and determine the new cost of the building.
- Compute the new annual depreciation for the building after the replacement cost of wooden floor made in 2016. (CTPS)
- Prepare the journal entries to record the revaluation of the building at the end of 2017.
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