BKAR2023 FINANCIAL ACCOUNTING AND REPORTING I I
SECOND SEMESTER SESSION 2017/2018 (A172)
COMPREHENSIVE CASE 2
INVESTMENT PROPERTY AND BIOLOGICAL ASSETS
DUE DATE: 18 APRIL 2018 (WEDNESDAY) BEFORE 12.00 NOON.
SUBMITTED TO:
PROF. MADYA DR. NORIAH BT CHE ADAM
PREPARED BY: GROUP 1 (GROUP G)
NAME
MATRIC NO
NUR EMIRIYAH JANNAH BINTI AHMAD
246779
HUSMIZA BINTI HUSSIN
248326
NOR ASMALINA BINTI AZIZAN
248508
FARRAH SHAZWANI BINTI MOHAMMAD ZAKIR
255903
UUM COLLEGE OF BUSINESS
UNIVERSITI UTARA MALAYSIA
Question 1
You are required to help Mr Kent by:
a) Identify the problem facing by Mr. Kent for the purchase of Warisan Building
The problem facing is, Mr Kent does not know how to record for the purchased of Warisan
Building.
b) Analyse the problem by referring to MFRS 140 Investment Property
MFRS 140 state that Investment Property is property (Land or a building or part of a
building or both) held (by the owner or by the lessee under finance lease) to earn rentals or
for capital appreciation (a rise in the value of an asset based on the rise in market price) or
both, rather than for use in the production or supply of goods or services of for
administrative purposes or sale in the ordinary course or business (Inventory).
A building should be classified as investment property only if the owner-occupied portion
is insignificant. Warisan Building have six double bedrooms. Five of them were used to
earn rentals and other one is used for employment benefit. Moreover, Warisan Building has
provided ancillary services but it is insignificant which are cleaning and security service
amounted RM600 a month compare to the double bedroom cost RM2, 100 a month.
Therefore, the entity may treat it as Investment Property.
c) Help her to make a decision related to the Warisan Building
Since the used of building is to be rental and the owner occupied can be classified as
Investment Property because the portion of owner-occupied property is insignificant.
Meanwhile the ancillary service provided is insignificant because only incurred small
amount so the building should be treated as investment property. Therefore, the building
should be classified as Investment Property.
d) Mr Kent also asked you to explain to him the difference of accounting treatment.
Between PPE (MFRS 116) and Investment Property (MFRS 140).
The difference between PPE (MFRS 116) uses cost model and Investment Property use
revaluation model. Revaluation model subjected to the depreciation and impairment loss
but fair value model do not have depreciation and impairment loss. Next, under revaluation
model recognize unrealized gain or loss into revaluation surplus at comprehensive income
and it is an equity item while fair value approaches change at fair value in profit and loss
statement at the current year.
Question 2
Prepare the journal entries on 1 April 2015 and 31 December 2015 related to Warisan
Building.
Date
Title
Debit
2015
April 1
Investment Property
Cash
(980000+20000)
1000000
Cash
Rental revenue
( 2100 x2x5)
21000
2015
Dec 31
Investment Property
Fair value gain on Investment Property
(1,170,000-1000000)
170,000
Cash
Rental Revenue
(2100×5)
10,500
Question 3
Briefly explain the accounting treatment for Warisan Building if Budi Tanah accepts the offer
by Utara Enterprise on 30 December 2015.
If Warisan Building accepts the offer by Utara Enterprise, Warisan Building will have a gain
on Investment Property (RM 2,500,000- RM 1, 170,000) RM 1330000. The gain will be
transferred to the profit or loss because the price offered by Utara Enterprise is greater than the
cost of Warisan Building.
Date
Title
Debit
Credit
2015
Dec 31
Cash
Investment Property – Warisan Building
Gain on disposal
2500000
1170000
1330000
Question 4
Prepare the journal entries on 30 June 2015 and 31 December 2015 related to Budi Building.
DATE
DEBIT
CREDIT
June 30
Cash
7,000,000
2015
Dec 31
FV loss on IP (6,800,000 – 7,000,000)
Investment property
200,000
200,000
Cash
Rental income
60,000
60,000
Cash
20,000