COMPREHENSIVE CASE 2

BKAR1013 Financial Accounting and Reporting I

Property, Plant and Equipment, Inventories, Cash and Receivables
A171
Submission date: 4 December 2017 (Monday)

For presentation : You are required to present the answers for all questions
EXCEPT Question 8 and 9 in QUESTION 2 and QUESTION 4

For report submission : Answer ALL questions

QUESTION 1

Refer Case 5 in the book: A Collection of Comprehensive Cases: Financial Accounting and Reporting
(I,II,III)(2017) on page 44 - 48. Answer questions 9 and 10.

QUESTION 2

Refer Case 6 in the book: A Collection of Comprehensive Cases: Financial Accounting and Reporting
(I,II,III)(2017) on page 51 - 57. Answer ALL questions EXCEPT questions 6 (page 58) and 10.

QUESTION 3

Refer Case 7 in the book: A Collection of Comprehensive Cases: Financial Accounting and Reporting
(I,II,III)(2017) on page 51 - 57. Answer question 1 only.

QUESTION 4

FikirJadi Bhd has prepared a site to construct a new building for companys operation. The site
is a two-acre of land and the ownership transfer of the land has just completed about a month
ago. The location of the land is very strategic and has become the focal point for a potential
business opportunity as it is surrounded by the office buildings and there is also a big shopping
complex nearby.

However, all the related construction activities have to be temporarily suspended due to the
cash flow problem and additional financing source from bank has yet been approved. While
waiting for the approval, the management team of FikirJadi has decided to utilize the site as a
parking lot to generate additional income to the company. Moreover, the site preparation is
completed and the excavation process may begin at any time. Therefore, using the site as a
temporary parking lot will not involve significant additional costs as the site is ready except
cost for hiring staff to operate the parking service.

For the first month of operation, FikirJadi Bhd earned RM60,000 related to parking service
revenue while the related costs involved are salary expenses of RM3,000 for parking staff,

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RM4,500 for administration expense and RM2,500 for other related costs. After the first month
of operation, the bank loan was approved and FikirJadi Bhd immediately stops the parking lot
operation and continues with the original planning to construct the building for companys
operation. The total cost for the construction starting from the excavation until the completion
was RM965,000 excluding the revenue and expenses related to the parking services. The
accountant of FikirJadi Bhd was not sure whether to include these revenue and expenses to the
cost of the land/the constructed building because the parking service revenue was earned and
the expenses were incurred on the construction site.

You are required to:

(i) Identify the problem facing by the accountant of FikirJadi Bhd.

(ii) Analyse the problem by referring to the MFRS 116 Property, Plant and Equipment
(Find the related paragraph in the standard).

(iii) Help the accountant of FikirJadi Bhd to make a decision related to accounting for the
above income and expense of parking operation.