Question

Posisang Bhd prepares its interim report on a quarterly basis. Its current financial year ends on...

Posisang Bhd prepares its interim report on a quarterly basis. Its current financial year ends on 31 December
2016. The business has bought a motor vehicle costing RM250,000 on 1 July 2016. The motor vehicle is
depreciated using the straight line method on a monthly basis and is expected to be used for 5 years.

1. Discuss the accounting treatment on the recognition and measurement principles applicable for the
above transaction in the preparation of the interim report for the third and fourth quarter.

Business   Accounting   
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Answer #1

An entity shall include in its interim financial report an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the end of last reporting period such as acquisition and disposal of items of property, plant and equipment.

Therefore acquisition of motor vehicles shall be disclosed in the interim financial report.

Its treatment will be as under :-

In third quarter Motar vehicle will shown as Property plant and equipment at carrying amount i.e. 250000 and depreciation for the quarter will be charged proportionally.

So the depreciation for the month comes to 4166.67 and for the third quarter i.e. September it comes to 12500.

Similarly for the forth quarter depreciation will be charged at 12500 for three months.

Please feel free to clarify any point/points.

Thanks

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