PART 1Bio Beauty Bhd (BB) is a Malaysian company, established in 2010. It sells range of cosmeticproducts for customers in Malaysia and South-East Asian countries. Since its inception, BBhas been very successful. With the increasing orders received by a company, BB has prepareda land site to construct a new warehouse for the company's operation. BB bought a three-acreland with and old factory building in the year 2019 at the price of RM500,000. BB paidRM2,000 for real estate taxes and RM1,500 real estate agent commission fees. The landownership transfer was just completed and an additional cost of RM30,000 was incurred forclearing the site. BB received RM8,000 from the residual value of demolished the old building.In order to ensure the safety of the property, BB incurred a cost totalled RM20,000 forinstallation of fences around the property. The plan has been arranged accordingly to ensurethat the warehouse could be constructed as soon as the site was ready. However, the loanapplied from CNN Bank was rejected and all related construction activities had to betemporarily suspended. BB then made a new loan application with BNN Bank. While waitingfor the loan approval, the management team of BB decided to utilize the site to generateadditional income for the company. The site was rented out for car boot sales activities in themorning and food truck operation at night. In the first month of operation, BB earnedRM80,000 related to rental service revenue and the related costs included RM4,800 for staffsalary, RM2,200 for administration expense and RM3,000 for other expenses. After one monthof operation, the bank loan was approved and BB immediately stopped the site rentingoperation and continued with its initial intention to construct the warehouse. The total cost toconstruct the warehouse, from excavation until completion, was RM880,000 (includingRM3,200 cost of inefficiencies caused by a labour strike). This cost excluded the revenue andexpenses related to the site rental operation. Since the rental revenue and expenses wereincurred on the construction site, Mrs. Tara, the accountant of BB was uncertain whether toinclude these revenue and expenses to the cost of land or cost of the constructed warehouse.You are required to:(а)Analyse the problem(s) faced by BB by referring to the MFRS 116 Property, Plantand Equipment (Hint: Find the related paragraph in the standard).(CTPS Question –Problem analysis)(b)Help the accountant of BB to make a decision related to the above issue(s)(CTPS Question - Generation of solution, evaluation and decision making).2

(A) The main issues which are faced by the Accountant of Bio Beauty Bhd (BB) Whether to include the…

18 Beauty BB) is a roducts for customers in Malaysia and as been very successful. With the increa land site to construct a new warehouse and with and old factory building in M2,000 for real estate taxes and RM wnership transfer was just completed a learing the site. BB received RM8,000 f Bhd Malaysi CO

18 Beauty BB) is a roducts for customers in Malaysia and as been very successful. With the increa land site to construct a new warehouse and with and old factory building in M2,000 for real estate taxes and RM wnership transfer was just completed a learing the site. BB received RM8,000 f Bhd Malaysi CO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

DIY Sdn Bhd is a Malaysian tax resident company. DIY is involved in manufacturing bricks. DIY needs to know regarding sales tax implications in the manufacturing business. The company plans to import special high-grade stones and carry out a change in the nature and quality of the materials by glazing them before sale. DIY’s current sales is RM350,000 and is projected to be around RM400,000 for the next few years a(i) Explain whether DIY Sdn Bhd activities will fall within the scope of manufacturing activities for sales tax purposes. a(ii) Discuss on the sales tax registration requirement and advice whether DIY need to be registered.
Alshamsi Ltd is a manufacturer of machine equipment product. The senior management has proposed to invest in a newmanufacturing plant that would aid in revolutionizing the machine equipment manufacturing process, and also thecompany’s products. A consultant has been engaged by the company, and has provided the following information: New equipment if purchased will cost $25,112,0 Old equipment–currently planned to be sold for $2,500,000 in four years – could be sold immediately for asalvage value of $5,250,00 If the new equipment is purchased, then this will increase the level of inventory immediately by $3,500,000, accounts receivable will increase by $1,444,500 and accounts payable increase by $3,500,000. The new equipment is estimated to have a useful life of four years and will depreciated using straight-linedepreciati At the end of four years, it is estimated that the salvage value on the new equipment will be$5,850,000. The cost of capital of the company is…
Ride Up Ltd. (“Ride Up”) is an outdoor sports and other gear manufacturer located in Johannesburg CBD. The entity’s financial yearend is 28 February. Although Ride Up has always purchased tents which they buy from an overseas supplier, the machinery required to produce high-quality tents has recently been made available to the South African market at affordable prices. Consequently, Ride Up is considering purchasing the required machine (Machine 10XP) on 1 March 2021, to manufacture the tents themselves The supplier of Machine 10XP is selling the machine for R 5 080 000. Alternatively, the machine can be leased from them at R770 000 payable annually in arrears. This is to allow the manufacturers to generate the required funds from sales of the tents during the year before being required to make the payment. Should Ride Up purchase the machine, they will qualify for a section 12C Income tax deduction of 40% in the first year and 20% thereafter. Ride Up will however not be able to…
Oman Chips company have noticed that the demand of their products increased in last few quarters. The company has decided to establish one production facility in Dhank, which will not only cover the demand of Al Dhahira region but also Al Buriami and some parts of Al Dakhiliya. The company purchased a land by using a significant amount and started constructing building and brought plant and machinery. During this whole process, one day they received a letter from public prosecution that this land is controversial and nothing can be done here. Now the case is in high court and it is expected that the company may lose this case. Now it is the responsibility of the company to _____________________. a. Disclose this issue in the annual meeting to come up with more ideas b. Disclose this information as it has a major impact on the balance sheet c. Show all information in their upcoming journal so that investor can get ideas d. None of the options
a retailer in the home improvement industry, currently operates seven retail outlets in Manama and Dubai. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $10,000 on market research to determine the extent of customer demand for the new store. Now Noor Supply must decide whether to build and open the new store. Which of the following should be included as part of the incremental earnings (or cash flow) for the proposed new retail store? The cost of the land where the store will be located. The cost of demolishing the abandoned warehouse and clearing the lot. The loss of sales in the existing retail outlet, if customers who previously drove across town to shop at the existing outlet become customers of the new store instead. The $10,000 in market research spent to…
b) Thirsty plc makes a revolutionary type of can called Soak. The can has a resealable top which allows the can to be sealed after opening to prevent gas escaping. In January 2019 the idea for this new product was launched, and a loan of £5 million was obtained from Sunshine Bank in order to finance this project. The associated costs and activities for the year ended 31 May 2020 are as shown below: 01 June 2019 – 31 July 2019: £30,000 per month on market surveys to establish whether or not consumers would want such can. The market Page 3 of 5 surveys suggest that there is a market for the can amongst environmentally aware consumers. 01 August 2019 – 30 September 2019: £100,000 for evaluation of a number of alternative prototypes and designs. End of September 2019: a design is chosen and engineers produce a plan which indicates that is technically possible to produce the Soak can. 01 October 2019 -31 January 2020: £1,300,000 was spent for the design and construction of a pilot…
Your manager has asked you to advise your client Kofi Gyato, owner and director of Kofi Gyato Limited, on the implications of the proposed transaction.Your client has identified an opportunity to develop his business by manufacturing the products which he sells. To do this he would need to buy a machine which will have an expected life of ten years. He has received this quotation for the machine.GHȼPrice of machine70,000Delivery and installation3,500Commissioning costs1,500Annual maintenance costs3,500Required:Prepare a report to your client. Your report should:(a) Explain the difference between capital and revenue expenditure, and how each type of expenditure affects the accounts of a business.(b) Indicate which of the costs of the machine should be considered as capital cost and which should be considered as revenue cost.(c) Define depreciation and explain how the accounting entries for depreciation affect each element of the accounting equation.(d) Indicate:(i) What the annual…
Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $5,480 per month. b. Remodelling and necessary equipment would cost $337,500. The equipment would have a 15-year life and an $10,500 salvage value. Straight-line depreciation would be used. c. On the basis of similar outlets elsewhere, Swanson estimated that sales would total $440,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $143,500 per year for salaries, $5,600 per year for insurance, and $30,500 per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place of 12.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Deduct:…
Vamoose plc is a company based in the Teeside which manufactures components for the motorised scooter and bicycle industry. Vamoose’s Research and Development unit has recently developed an innovative new product for which there is considerable market demand. The production of this new product represents a major shift in Vamoose’s strategic direction as a company. Subsequently, the company is now planning to acquire a piece of equipment to manufacture the new product. The equipment will cost £6,600,000 and is expected to last for 5 years with an estimated scrap value of £2,300,000. Management expects to produce 160,000 units per annum (p.a.) of the new product, which will be sold for £68 per unit in the first year. Production costs per unit (at current prices) are as follows: Materials: £28.50 Labour: £24.40 Materials are expected to inflate at 8.5% p.a. and labour is expected to inflate at 6.5% p.a. Fixed overheads of the company currently amount to £1,370,000. These are not expected…
Vamoose plc is a company based in the Teeside which manufactures components for the motorised scooter and bicycle industry. Vamoose’s Research and Development unit has recently developed an innovative new product for which there is considerable market demand. The production of this new product represents a major shift in Vamoose’s strategic direction as a company. Subsequently, the company is now planning to acquire a piece of equipment to manufacture the new product. The equipment will cost £6,600,000 and is expected to last for 5 years with an estimated scrap value of £2,300,000. Management expects to produce 160,000 units per annum (p.a.) of the new product, which will be sold for £68 per unit in the first year. Production costs per unit (at current prices) are as follows: Materials: £28.50 Labour: £24.40 Materials are expected to inflate at 8.5% p.a. and labour is expected to inflate at 6.5% p.a. Fixed overheads of the company currently amount to £1,370,000. These are not expected…
Vamoose plc is a company based in the Teeside which manufactures components for the motorised scooter and bicycle industry. Vamoose’s Research and Development unit has recently developed an innovative new product for which there is considerable market demand. The production of this new product represents a major shift in Vamoose’s strategic direction as a company. Subsequently, the company is now planning to acquire a piece of equipment to manufacture the new product. The equipment will cost £6,600,000 and is expected to last for 5 years with an estimated scrap value of £2,300,000. Management expects to produce 160,000 units per annum (p.a.) of the new product, which will be sold for £68 per unit in the first year. Production costs per unit (at current prices) are as follows: Materials: £28.50 Labour: £24.40 Materials are expected to inflate at 8.5% p.a. and labour is expected to inflate at 6.5% p.a. Fixed overheads of the company currently amount to £1,370,000. These are not expected…
All amounts are in $AUD. In order to satisfy the sharp increase in demand KGN is evaluatinginvesting in a “Mega Warehouse” project in Australia. KGN has already identified two existing warehouses. In order to mitigate the risk and assess the fit for purpose of these facilities KGN asked “Axiom Ltd.” to conduct a technical due diligence. “Axiom Ltd.” is asking $100,000 as a fixed fee for its consulting services. Project A has an initial outlay of dollars $150 million and Project B has an initial outlay of $85 million. Project A will generate additional revenues of 45 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $1million immediately, this working capital will be recovered at the end of the project. Project B will generate additional revenues of 25 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $2million immediately, this working capital…