BBFA 2013 Financial

Accounting Framework
Tutorial 1 , Question1
Present By , Khong Liwen Agnes
Q1 , Ollie Bhd .(Ollie) purchased an item of
plant during 2016. The details are as follows:

RM
List Price 1,200,000
Trade discount 10%
Shipping and handling costs 16,000
Pre-production testing 25,000
Staff training on use of plant 18,000
Maintenance for four year 60,000
Site Preparation
Concrete reinforcement 12,000
Electrical cabling and writing 34,000
Labour cost 36,000
 The Following information is relevant:
1. Ollie had specified wrong cables and the cost of correcting the
error of RM12,000 is included in the electrical cabling costs.
2. Ollie settled the amount due to the vendor within the credit
period and obtained a 2% early settlement discount on the
purchase price .
3. The plants is expected to last for five years , at the end of
which Ollie will incur compulsory dismantling costs of
RM10,000 and site restoration cost of RM5,000. The present
value of RM1 received in five years time is RM0.75 ,using a
discount rate 6% .
4. The residual value of the plant is estimated at RM 26,000.
Required:

a) Calculate the amount that will be recognized as

plant.
b) Show the extract of the Statement of Profit or
Loss for the year ended 31 December 2016.
c) Show the extract of the Statement of Financial
Position as at 31 December 2016.
a) Calculate the amount that will be Note : IAS 16 , Page 3
5.1 Initial Cost
recognized as plant. (Initial cost)
List Price 1.2M 1,200,000
Trade discount (1.2M x 10%) (120,000)
Shipping and handling 16,000
Pre-production testing 25,000
Concrete reinforcement 12,000
Electrical cabling and writing(34,000-12,000)(Note1) 22,000
Labour cost 36,000
Dismantling costs [(10,000 + 5,000) x 0.75](Note3) 11,250

Initial cost of machinery 1,202,250

 b) Show the extract of the Statement of Profit or
Loss for the year ended 31 December 2016.
Statement of Profit or Loss (extract) For The Year End 31 December 2016
RM
Income
Discount received (1,080,000 x 2%) (Note2) 21,600

Expenditure
- ) Maintenance (60,000 /4 years) (15,000)
- ) Depreciation [(1,202,250-26,000)/5 years] (Note4) (235,250)
- ) Staff training (18,000)
-) Cost of correcting wrong cable (Note2) (12,000)
-) Finance Cost (11,250 x 6%) (675)
c)Show the extract of the Statement of
Financial Position as at 31 December 2016.
Statement of Financial Position (extract) as at 31/12/16
RM RM
Non Current Assets
Property plant and equipment 1,202,250
-) Depreciation (235,250) 967,000
Current Assets
Prepaid maintenance (60,000 x 3/4 years) 45,000
Non Current Liabilities
Provision for dismantling and restoration (11,250 + 675) 11,925
Thank You !