Question

On June 30, 2015, the Statement of Financial Position of Affan Sdn. Bhd. included the following:

                                                                                                RM                           

       Freehold land, at cost                                                       220,000

       Building, at cost                                                               660,000

       Machinery, at cost                                                            100,000

       Accumulated depreciation of building                             (66,000)

       Accumulated depreciation of machinery                          (19,000)

During the year ended June 30, 2016, the company purchased a new machinery. Further details are provided below:

Type of asset	Machinery
Date of purchase	1 July 2015
Purchase price	RM60,000
Additional costs incurred:
Cost to install the machine	RM8,500
Import duty	RM600
Transportation costs	RM1,400

It is the policy of the company to depreciate its building using the straight method of 5% per annum and machinery on diminishing balance method at 10%. On 30 June 2016, the freehold land was revalued to RM450,000.

Required:

Calculate the depreciation expense of building and machinery for the year ended 2016.

Show how the company’s property, plant and equipment is presented in the Statement of Financial Position as at June 30, 2016. Use the format below.

Property, plant and equipment	RM
Freehold land, value
Building, at cost
Machinery, at cost
Accumulated depreciation of building
Accumulated depreciation of machinery

Answer 1

Calculation of Depreciation expense of building for the year ended 2016:

Cost of Building= RM 660000
Rate of Depreciation= 5%
Depreciation expense= 660000*5%
= RM 33000

Calculation of Depreciation expense of Machinery for the year ended 2016:

Cost of Machinery= RM 100000
Accumulated Depreciation= 19000
Book Value of Machinery= RM 81000
Depreciation= 10%*81000
= RM 8100

Cost of New Machinery= RM 60000+ RM 8500 +RM 600+ RM 1400
= RM 70500
Depreciation= 10%*70500
= RM 7050

Total Depreciation expense of Machinery= RM 8100+ RM 7050
= RM 15150

Presentation in Statement of Financial Position as at June 30, 2016:

Property, Plant and equipment	RM
Freehold land, value	450000
Building at cost	660000
Machinery at Cost	170500
Accumulated depreciation of building	99000
Accumulated depreciation of machinery	34150