Reference no: EM132591412

Question - Qiudin Bhd which was incorporated in 2010, need two machineries to expand the business operation. The first machinery was bought from other company, however the second machinery was self-constructed by company.

Machinery 1

On 1 March 2019, Qiudin Bhd places an order for a machinery from a company in New Zealand. The machinery was delivered on 29 March 2019 and the invoice price of machinery was RM100,000 with a cash discount of 2% if paid within 30 days. Payment was made during discount period. Import duties and taxes amount to RM20,000. The following costs were also incurred:

a. Delivery and transportation costs was RM12,500.

b. Installation and commissioning costs was RM12,000.

c. Administrative costs was RM2,500.

d. Start-up and pre-production costs was RM6,000.

e. Insurance on shipment was RM2,300.

f. Exchange currency loss from the transaction with New Zealand company was RM1,500.

Machinery 2

On August 2019, Qiudin Bhd constructs the machinery for its own used in production. The expenditures related to construct the machinery were:

a. Contractor costs to construct the machinery was RM21,000.

b. Direct labour and material used in the construction was RM17,000.

c. Engineering and technical overheads cost was RM5000.

d. Interest incurred to finance the construction was RM4,000.

e. Costs of testing the machinery was RM2,000.

f. General administrative costs allocated was RM3,200.

g. Advertising costs was RM1,000.

Of the direct material and labour used, RM3,000 is attributable to cost inefficiencies caused by a labour strike. During the testing of the machinery whether it is functioning properly, this company produce a sample from the machinery which has been sold at RM800.

Atif, a junior accountant in the company was uncertain about the accounting treatment for all the expenditure incurred and revenue earned (if any). Since you are a senior accountant in the company, she need your advice related to this matter.

REQUIRED -

1. Identify the issue (s) faced by Atif, the junior accountant of Qiudin Bhd.

2. Analyse the problem (s) faced by Atif by referring to related paragraph in the MFRS 116 Property, Plant and Equipment.

3. Help Atif to make a decision related to the above issue (s) by providing justification based on the MFRS 116 Property, Plant and Equipment.